Credit Risk Funds

While spends saw a robust increase on a YoY basis, there was a slight moderation compared to previous month, where spends had touched Rs 1.93 trillion

Investors with high risk-bearing capacity may allocate 5-10% of their fixed-income portfolio

Returns have largely stemmed from accrual income and credit spreads

High credit offtake, lower credit cost to support bottomline

True North's 'Performing Credit Regular Income Fund' bridges the supply-demand gaps with custom solutions for middle-market companies

For financial intermediaries globally, interest rate risk seems to be higher than credit risks, of loans turning non-performing assets, at this point. Fortunately, India is a different story

Take moderate exposure to these funds, given the potential for defaults and downgrades in their lower-rated portfolios

Private credit funds lend to these companies at 12%-18%, splitting transactions into tranches. The riskiest of such credit can yield up to 20%-24%

YTMs of all debt fund categories, except credit risk and overnight, in a narrow range of 6.3-7.3%

10 out of 16 schemes have delivered below 6% returns in one year; Category AUM still a fraction of pre-pandemic level

The past few months have seen several debt fund categories delivering subdued returns because of the spike in bond yields.

Credit risk funds are showing a category average return of 13.2 per cent for the past year

After witnessing sharp outflows in 2020, credit risk funds are once again back on investor radar

Given their high-risk nature, take limited exposure in your satellite portfolio

This is thanks to economic revival, improving upgrades to downgrades ratio, say experts

'Extraordinary scenario' say experts as both, short and long-duration funds give low returns

Go with a fund manager who negotiated the past 5 years without default or downgrade

Yet these schemes have run out of investors' favour since April 2020, especially after the Franklin Templeton episode

The fund maintained modified duration in the range of 1.7 years to 3.7 years during the past 3 years, averaging 3 years

Debt schemes take significant exposure in not-so-highly rated companies and had lost their appeal after April 2019