One of the insightful discussions on Debt PMS, at the PMS Bazaar Conclave 2024 held in Bengaluru, from Sundaram Alternates.

The speakers for this topic were Vikaas M Sachdeva, Managing Director, Sundaram Alternates & Sunil Mohan, Chief Manager, Sundaram Alternates

The presentation opens with Vikaas M Sachdeva outlining the immense growth potential of the Indian economy and underlining the role of alternative investment funds (AIFs) in fuelling this growth. He then identifies a crucial gap for retail investors who are usually kept outside the reach of private credit opportunities, traditionally accessible only to institutional investors.

Sunil Mohan takes over to elaborate on Debt PMS, a new product introduced by Sundaram Alternates to bridge this gap. He sheds light on the limitations of conventional debt products like fixed deposits (FDs) and debt mutual funds, which offer either low liquidity or underwhelming returns. Debt PMS, on the other hand, invests in rated and listed securities, striking a careful balance between liquidity and potentially higher yields (8% to 12%) through a combination of regular coupon payments and capital gains opportunities.

Mohan elaborates on the distinct features of Debt PMS, including diversification achieved by investing across 10-15 securities, risk management bolstered by thorough credit analysis, and a focus on regular income generation. He underscores the transparency offered through regular portfolio reporting and highlights the tax advantages associated with capital gains from listed securities. The underlying investments will primarily be in non-convertible debentures, corporate bonds, commercial papers, and preferred capital.

Sachdeva concludes by presenting three compelling reasons why investors should seriously consider Debt PMS. First, it provides an attractive debt allocation option, particularly relevant in a scenario of declining interest rates. Traditionally, debt mutual funds fulfilled this role by leveraging tax benefits. However, with the waning importance of indexation, the onus falls on the fund manager's skill in generating alpha. This makes Debt PMS, with its potential for higher yields, a more enticing proposition.

Secondly, Sundaram Alternates' pedigree in credit management emerges as a significant advantage. Backed by its parent company Sundaram Finance's strong track record, Sundaram Alternates possesses the expertise to navigate the credit market and identify lucrative opportunities. This translates into the potential for superior returns for investors who choose Debt PMS.

In essence, Debt PMS offers a unique blend of liquidity, potentially higher yields, regular income, and transparency, making it a compelling option for investors seeking to optimise their debt allocation strategy in the evolving Indian market. The product leverages the expertise of Sundaram Alternates' credit management team and caters to a niche currently underserved by conventional debt products.