The Category III alternative investment fund would allocate about 51-60% to listed equities and the remaining 40-49% to high-yield private credit, the company said.
The fund is expected to be raised over the next six to eight months and will have a five-year tenure with an investment horizon of about four years.
The target fund size is ‘1,500 crore with the green shoe option of ‘500 crore. The fund is calling it a first of its kind hybrid fund strategy with the investment focus across performing mid-market businesses and selective special situations including real estate brownfield opportunities.
The credit portion of the fund is expected to generate annual returns of around 15-16%, based on the firm’s existing private credit strategies. Over a four-to-five-year horizon, this component alone could provide a large portion of the fund’s capital protection through steady accruals.
The equity part will invest in a concentrated portfolio of listed companies. The firm believes the hybrid structure can deliver a blended portfolio return of about 18-20% before tax, translating into low-to-mid-teen post-tax returns for investors.
Sundaram Alternates currently manages multiple private credit funds across sectors including real estate, manufacturing, healthcare and financial services, and has a pipeline of about ‘3,000 crore of potential credit investments. The hybrid fund will draw credit opportunities from this existing pipeline while building the equity portfolio through its established stock selection framework. The new offering will be the firm’s 11th alternative investment fund and form part to expand product offerings for family offices, institutional investors and large treasuries seeking risk-adjusted returns amid volatile markets.