Debt with a twist: Kotak launches hybrid fund targeting India’s mid-cap growth

Kotak Alternate Asset Managers Ltd (Kotak Alts) has launched the Kotak Yield & Growth Fund (KYGF), a hybrid investment strategy that aims to combine steady private credit yields with equity-linked upside potential, targeting India’s mid- to large-cap businesses.

The Mumbai-based firm unveiled KYGF on September 29, positioning it as a differentiated offering in India’s maturing private credit market. The fund seeks to generate risk-adjusted returns by blending security-enhanced private credit with selective exposure to equity instruments.

“Investors are asking for two things—yield and growth—and this fund gives them both,” said Eshwar Karra, Deputy Managing Director at Kotak Alts. “We are backing strong businesses with clear exits and structured protection.”

KYGF will focus on cash-flow positive enterprises—both listed and unlisted—with strong governance standards. The strategy emphasizes capital preservation through structural safeguards like collateral coverage, seniority, and predefined monetization routes.

Amit Jain, Partner at Kotak Alts, said the team would stick to familiar terrain: “We will focus on underlying cashflows and back businesses that we understand well.”

Unlike traditional equity-driven funds, KYGF is sector-agnostic and built around Kotak Alts’ proven credit underwriting model, which has delivered consistent 18–20% returns with zero defaults across global mandates. Kotak Alts manages ₹40,000 crore in private credit assets and is now offering this fund to Indian family offices and institutional investors.

This new vehicle extends the group’s private credit playbook—previously aimed at global investors—to domestic capital. The launch is part of Kotak Alts’ broader push to deepen its presence in India’s alternative investment landscape, having already managed over ₹1.6 lakh crore across asset classes since its inception in 2005.

With KYGF, Kotak is doubling down on structured finance as a growth catalyst for Indian enterprises, while promising its investors a steady income stream fortified by rigorous risk management.