Axis AMC's Nachiket Naik says new credit AIF to be fully deployed by July, not chasing 'beauty contest of returns'

Axis AMC has deployed 65% of its Structured Credit AIF II fund and expects to complete full deployment by July, ahead of plans to launch its next credit vehicle, Nachiket Naik, Head – Structured Credit at Axis AMC has told Moneycontrol.

Naik said the roughly Rs 740 crore fund - anchored by insurers, corporate treasuries and family offices - is focused on fully secured transactions with an A- rating for the average portfolio.

Edited excerpts:

Q: How far along is the Axis Structured Credit AIF II fund in terms of deployment?
We did the final closure of the fund recently. At present, we are 65% deployed and expect to be fully deployed by July. Post that, we plan to launch our next fund. You have to run this product like a treadmill—continuous capital. You can’t be in a situation where either an investor doesn’t have your product available to deploy funds or an issuer is told, “Let’s wait till we raise our next fund.” The fund has to be available when the need arises. You can’t build this business with a one-off fund.
The investor base is largely institutional—insurance companies, corporate treasuries, and a few family offices. These are not high-risk seekers. They want steady, predictable outcomes. This fund fits neatly between fixed income and special situation credit, aligning well with our conservative, relationship-led lending strategy.

Q: What differentiates your credit strategy from others in the market?
First, our deals are self-originated. We’re not dependent on external platforms or brokers. We structure and underwrite each transaction in-house, leveraging long-standing client relationships. Second, our entire philosophy is risk-first. Traditional asset management is often about return maximisation. Credit, on the other hand, is about protecting capital. We’ve adopted bank-like risk frameworks—caps on issuer, group, and sector exposures. The product is built around risk controls, not just chasing IRRs.

Q: How do you see investor preferences evolving in this space?
There are two clear investor cohorts now. One comprises domestic institutions—insurers, large treasuries—who are comfortable with moderate risk and stable returns. The other includes high-yield investors like offshore LPs or family offices looking for elevated IRRs and willing to accept higher volatility. These often come into special situations or growth credit. Both segments are growing, but the expectations and risk appetites are very different.

Q: How do you build a portfolio in this environment?
Granularity and diversification are key. We follow strict caps on exposure to single names, groups, and sectors—just like banks. No one transaction can be large enough to impair the portfolio. These frameworks aren’t arbitrary; RBI introduced similar norms for good reason. We’ve embedded the same logic into our fund structure. It gives us downside protection and keeps concentration risk in check.

Q: Are there early signs of stress in the credit ecosystem?
Yes, especially in unsecured lending. Small-ticket personal loans are beginning to see stress. Some newer-age businesses are also showing rising delinquencies. Many of these models assumed uninterrupted access to capital. When that dries up, refinancing becomes difficult, and stress builds. The last few years were marked by risk-on sentiment. That’s shifting. When the tide turns, managers with strong underwriting will be better positioned than those who simply rode the wave.

Q: What’s your view on leverage and secondary markets in private credit?
Both are likely to be game-changers. Globally, investor-side leverage is used to improve returns. Even modest leverage can significantly boost IRRs. We’re seeing wealth platforms in India beginning to offer this to investors. As for liquidity, private credit funds are close-ended, so secondary markets are crucial. A few players are exploring secondary funds to offer exit options. Combined, leverage and secondaries could reshape how investors approach this asset class.

Q: Are you competing with banks or working alongside them?
We complement them. Banks continue to handle working capital and term loans. But many capital requirements today—like M&A funding, promoter buyouts, or PE exits—fall outside traditional banking products. These are situations where banks either can’t participate or take too long. That’s where we step in. It’s about offering financial solutions, not just money. And because we operate within a broader ecosystem, we have the credit history and client relationships to act fast.

Q: Do you only invest in secured structures?
Yes. Our entire portfolio is secured. The average rating is A minus. Even for customised structures, we ensure we’re well covered—collateral, cash flows, and covenants. We’re not looking for equity-like upside. Our goal is resilience and safety. This isn’t a beauty contest on returns. It’s about protecting capital and scaling responsibly.

Q: What’s your outlook for the next 12–24 months? Will this market consolidate?
Absolutely. The space is likely to consolidate. Asset managers that can originate and underwrite deals—rather than just aggregate capital—will be the ones to scale and survive. The coming cycle will separate asset gatherers from true credit managers. Performance through this soft patch will determine the next set of market leaders.