Sub-par returns in over half the schemes plague credit risk funds

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

Most debt funds, except for credit risk funds, have got their mojo back after the rate hikes. The yield-to-maturity (YTM) of these high-risk schemes is still 8 per cent or below —slightly better than the YTM (7-7.25 per cent) of safer fund categories like corporate bond funds.

Moreover, the slight rate differential ebbs if the fund management expenses or expense ratios are taken into consideration. 

Credit risk funds command around 1 per cent expense ratio, against a modest 0.3 per cent for corporate bond funds.

As a result, the net yield (YTM minus expense ratio) of both scheme categories is