AIF Debt Funds vs. Debt Mutual Funds
AIF Debt Funds invest in private, unlisted debt instruments of mid-market companies, real estate developers, and NBFCs. Unlike debt mutual funds, AIF debt funds provide direct credit to borrowers with customised terms, superior security, and significantly higher yields of 12–18% p.a.
- Higher Yields: 12–18% vs. 6–8% for traditional debt MFs
- Secured Instruments: First charge on assets, promoter guarantees
- Customised Terms: Bespoke loan structures aligned to business cashflows
- Lower Mark-to-Market Risk: Held to maturity, no daily NAV volatility
- Quarterly Distributions: Regular income payments enhance total return
Credit Portfolio Construction
AIF debt funds build diversified credit portfolios:
- Maximum 10–15% exposure per borrower for concentration risk management
- Diversification across sectors: RE, manufacturing, services, NBFC
- Tiered security: mortgage, pledge, receivable assignment, guarantee
- Continuous monitoring: monthly MIS, quarterly covenants, site visits
- Proactive restructuring: early intervention at first sign of stress