Vivriti Short Term Bond Fund

Soumendra Ghosh ( Head Capital Markets ) 

• Part of the founding member at Vivriti GroupChief Investment Officer at Vivriti AMC
• 15 years of experience in structured finance, banking, and technology
• Structured and closed over US$ 5 Bn of fixed-income deals in domestic and offshore markets

About Company:

Vivriti Group was set up in 2017 to make debt markets efficient, transparent and add value to both issuers and investors alike by leveraging technology to discover, execute monitor debt investments.

It owns the largest technology-enabled debt marketplace in India – CredAvenue. The platform has multiproduct capability, state-of-the-art risk management, and allows for discovery, investment execution and post-investment fulfilment of debt transactions.

Vivriti AMC, part of Vivriti Group, manages closed-ended fixed income alternate investment funds (AIFs) that raise domestic and global capital to invest into sectors of the group’s focus through CredAvenue. Vivriti AMC has pioneered debt AIF in India with many industry firsts to its credit.

About the Product

A debt fund maximises safety, liquidity, and returns without sacrificing one pillar to improve the other. Scores highly in terms of safety, protection against both credit and interest rate risk, liquidity, reliable inbuilt annual and quarterly cashflows that decrease risk exposure, and returns that outperform inflation by a wide margin.

Portfolio companies are well-established NBFCs with strong corporate governance, discrete operations, a long track record, and industry-leading monoline businesses.

The Fund, which banks respect, insurance firms, family offices, UHNIs, and leading advisory partners, is nearing its final close, including a green shoe option.

They thrive in handling fixed income alternate investment funds (AIFs) that manage highly diversified credit portfolios. These AIFs link global and domestic capital to high-potential enterprises that drive India’s growth, employment, and innovative thinking.

Why this product?

The fund is innovated structured:

• The fund provides highly predictable principal cashflows and returns mitigating the illiquidity issues faced by other close-ended products.
• Low correlation to other traditional fixed income and equity products, which makes it a good, diversified product from an asset allocation stand-point:
  • No interest rate risk or MTM risk as suffered by open-ended MF vehicles
  • Closed-ended structure ensures unitholders are not subjected to volatility and vagaries of fellow unitholders in the fund, thus avoiding liquidity run on the fund

 Underlying Portfolio:

• Retail Financial Services
• Investing in entities which are well capitalised, high vintage and have steered through multiple crises over the past decade and emerged successful

• The fund invests in senior debt issued by retail financial services companies core to economy, and expected to play a key role in revival out of COVID-induced slowdown
• The fund invests in entities with proven track record of delivering financial services to individuals for income generation, and small enterprises. These firms have raised multiple rounds of private equity from marquee global & domestic investors or are backed by large, reputed groups

The Fund seeks to achieve a superior risk-adjusted return by investing in debt instruments issued by businesses that provide retail financial services, including NBFCs, in the areas listed below.

• Formal and informal businesses: Working capital, term, machinery, and general-purpose loans are available to micro, small, and medium-sized businesses.
• Education: Suppliers of loans to low-income private schools for infrastructure improvements and student education loans.
• Entrepreneurs: Individuals who provide asset-backed and small-ticket unsecured loans for income generation.
• Individuals: for housing, healthcare, disaster relief, and consumption.

The trust is consistent with India’s growth prospects, in which the availability of timely and effective finance is critical to the development of enterprises, the rise of entrepreneurship, and the support of economic consumption.

• No poverty: Put an end to poverty in all of its forms everywhere.
• Good health and well-being: Ensure a healthy lifestyle and promote well-being for people of all ages.
• Gender equality: Make gender equality a priority and enable all girls and women.
• Decent work and economic growth: Encourage inclusive, long-term growth in the economy, full and productive employment, and decent work for all.
• Industry, innovation and infrastructure: Construct resilient infrastructure, and encourage inclusive and sustainable industrialisation and innovation.
• Reduced inequalities: Reduce inequity within and between countries.

Bond funds in short-term bonds invest in bonds that mature in one to three years. Because of the short time until maturity, interest rate risk—or the risk that rising interest rates will cause the Fund’s principal value to fall—is low compared to intermediate- and long-term bond funds. Even the most conservative short-term bond funds will experience some share price volatility.

Due to the lower risk of short-term bond funds, many investors use them as a higher-yielding substitute for money market funds. Short-term bond funds are usually the next rung regarding risk and potential return.

Interest rate changes impact bond payments, and short-term bonds have fewer payments to make. A small change in interest rates for a year or two will have little effect on a bondholder’s income. However, if that bond has several years of payments left, small changes in interest rates can result in significant gains or losses.

• Industry 1^st AIF product which provides annual return of capital and quarterly coupon
• Investing in well-regulated entities with healthy capitalization and high vintage
• First loss protection available to senior tranche
• The Senior tranche (i.e. Class A) is rated as CRISIL AA+ (SO) for capital protection available in Vivriti Short Term Bond Fund
• No MTM or interest rate risk
• Alpha of 500 bps + over traditional fixed income products