Allianz backs Indian distressed debt fund for first time

The insurer has accepted a risk capital charge in exchange for yield enhancement from non-rated debt instruments.

Allianz Investment Management, an investment arm of Munich-headquartered insurance group Allianz, has made its first private debt investment in India, committing more than $200 million of capital to Edelweiss India Special Assets Fund II as the insurer looks for yield enhancement for its investment portfolio.

According to Sebastian Schroff, Munich-based global head of private debt and opportunities at Allianz Investment Management, the capital commitment to the Indian distressed debt vehicle comes from the insurer’s balance sheet.

In line with Allianz’s global private debt strategy, the insurance giant has been ramping up its private credit investment exposures and operations across Asia-Pacific since last year. For instance, Allianz Global Investors hired two former Abraaj directors for Asian private credit – Sumit Bhandari and Weizhong Yun – in November 2018.

EISAF II is managed by Edelweiss Alternative Asset Advisors, an investment arm of Edelweiss, as PDI previously reported. Fund II held a final close on $1.3 billion in capital commitments in December 2018, according to Edelweiss Financial Services’ executive director and co-founder Venkat Ramaswamy.

Fund II plans to invest in stressed assets, targeting turnarounds in the corporate and real estate markets. It also plans to leverage on the group’s ARC platform, which acquires bank loans in India. The vehicle has a four-year investment period within a nine-year fund life.

“Allianz is able to invest in such non-rated debt instruments based on the very good solvency ratio of 229 percent,” Schroff noted. “These investments do require more risk capital but in return provide a yield enhancement to the portfolio.”

Allianz is the parent company of Allianz Global Investors and PIMCO (Pacific Investment Management Company Group). Allianz has invested €7.2 billion in private equity “which provides strong yield enhancement, but also requires more risk capital than investment grade debt instruments,” according to a spokeswoman for the insurance group. The group’s AUM was sized at €672.8 billion, of which 19 percent was allocated to alternative assets, as of 31 December 2018.