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A report released by Motilal Oswal Private Wealth shows that the appetite for private credit funds or credit opportunities funds among HNIs and Ultra HNIs has been growing rapidly.
Private credit funds invest primarily in loans to private companies, seeking to generate income by investing in loans of private companies.
The report claims that these funds can offer returns of14-16% which are similar to equity funds. Further, the report estimated that the AUM of private credit funds will increase from Rs.10,000 crore to Rs.1.50 lakh crore by 2025.
Jayesh Faria, Associate Director, Motilal Oswal Private Wealth, “Technically, investing in private credit funds is for those investors who are willing to take on the risk of investing in low-rated debt securities offering high-interest rates to earn higher returns than those offered by AAA-rated debt securities. However, it is ideal to limit your exposure to such funds to about 10% of your debt portfolio. The private credit financing industry is growing at a tremendous pace and I am seeing many investors are willing to invest in such funds.”
