Santosh Kamath of Franklin Templeton MF is back with a new credit alternative investment fund
Published by Mint
Abhishek Kumar's role: Quoted
Abhishek Kumar, founder of SahajMoney, said the new private credit AIF could suit investors willing to take higher credit risk for at least six years with ₹1 crore to invest, and noted a similar strategy had hurt small investors in the manager's earlier debt funds.
What Abhishek Kumar said
Who could consider a private credit AIF that lends only to financial services companies?
In my view, it fits investors who are prepared to carry more credit risk in the debt part of their portfolio and can stay invested for six years or more, since the fund has a four-year term that can be stretched by another two years. It also asks for a minimum investment of ₹1 crore, so it is only for those with a large investable corpus.
What kind of debt does this private credit AIF plan to hold?
The fund plans to put its money into senior debt of financial sector companies rated between A and BBB. As I see it, the manager is reaching into the lower end of the credit pool in the hope of a very large payoff, which is why it suits only opportunistic fixed-income investors who want above-average returns and accept the risks that come with them.
Why has this credit strategy moved from a mutual fund to an AIF?
A similar approach had very damaging results for small investors in the debt mutual funds this same manager ran earlier. Now the strategy has been taken to the AIF route with a much higher ticket size, and because the fund is close-ended, it does not need to give investors immediate liquidity before the AIF reaches maturity.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on mutual funds
Mint reports that Santosh Kamath, who led Franklin Templeton MF's fixed-income team when it wound up six debt funds worth ₹25,000 crore in 2020, was launching a close-ended private credit alternative investment fund that lends to financial services companies. The article recounts the 2020 episode and its aftermath, and advisers discuss the fund's costs, tax, ticket size and risks. It includes comments from Abhishek Kumar.
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Santosh Kamath of Franklin Templeton MF is back with a new credit alternative investment fund