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Fund categories
Equity
Debt
Fund categories
Equity
Debt
Credit Risk Funds
Fund categories
Bank of India Credit Risk Fund - Direct
Equity | Credit Risk Fund
1Y returns
17.36%Min. Invest
₹5,000
AUM
₹86.74 Cr
Aditya Birla SL Credit Risk Fund - Dir (G)
Equity | Credit Risk Fund
1Y returns
12.81%Min. Invest
₹100
AUM
₹1,461.39 Cr
DSP Credit Risk Fund - Direct (G)
Equity | Credit Risk Fund
1Y returns
10.80%Min. Invest
₹100
AUM
₹275.31 Cr
ICICI Pru Credit Risk Fund - Direct (G)
Equity | Credit Risk Fund
1Y returns
8.44%Min. Invest
₹100
AUM
₹6,212.04 Cr
AXIS Credit Risk Fund - Direct (G)
Equity | Credit Risk Fund
1Y returns
8.40%Min. Invest
₹5,000
AUM
₹361.56 Cr
Invesco India Credit Risk Fund - Direct (G)
Equity | Credit Risk Fund
1Y returns
7.90%Min. Invest
₹1,000
AUM
₹163.40 Cr
Nippon India Credit Risk Fund - Direct (G)
Equity | Credit Risk Fund
1Y returns
7.78%Min. Invest
₹500
AUM
₹1,486.26 Cr
Kotak Credit Risk Fund - Direct (G)
Equity | Credit Risk Fund
1Y returns
7.72%Min. Invest
₹100
AUM
₹767.90 Cr
SBI Credit Risk Fund - Direct (G)
Equity | Credit Risk Fund
1Y returns
7.68%Min. Invest
₹5,000
AUM
₹2,174.86 Cr
HDFC Credit Risk Debt Fund - Direct (G)
Equity | Credit Risk Fund
1Y returns
7.14%Min. Invest
₹100
AUM
₹7,693.35 Cr
Baroda BNP Paribas Credit Risk Fund-Dir (G)
Equity | Credit Risk Fund
1Y returns
6.83%Min. Invest
₹5,000
AUM
₹177.42 Cr
UTI-Credit Risk Fund - Direct (G)
Equity | Credit Risk Fund
1Y returns
6.43%Min. Invest
₹500
AUM
₹254.23 Cr
HSBC Credit Risk Fund - Direct (G)
Equity | Credit Risk Fund
1Y returns
6.19%Min. Invest
₹5,000
AUM
₹470.01 Cr
Bandhan Credit Risk Fund - Dir (G)
Equity | Credit Risk Fund
1Y returns
5.68%Min. Invest
₹1,000
AUM
₹230.85 Cr
What are Mutual Funds with Credit Risk?
Mutual funds with credit risk are a type of debt mutual fund that invests primarily in lower-rated corporate bonds. These bonds carry higher risks of default but offer higher interest rates to compensate for the increased risk. The goal is to generate higher returns by taking on additional credit risk.Credit Risk Mutual Fund Characteristics
These mutual funds are designed to invest in lower-rated corporate bonds, offering potentially higher returns due to the increased risk. Here are some key characteristics to consider:- Higher Yield: These bonds have a higher yield. Thus, they invest in credit risk with lower-rated bonds that offer higher interest rates.
- Credit Risk: It has a higher risk of default compared to high-rated bonds.
- Diversification: It is easy to spread mutual fund investments across various issuers and sectors.
- Professional Management: These bonds are managed by experts who assess creditworthiness.
- Potential for Capital Gains: If the credit rating of the bonds improves, it can give you capital gains.
- Liquidity: Generally, the bonds offer good liquidity, allowing easy entry and exit.
How do Credit risk funds Work?
These funds pool money from investors to invest in a diversified portfolio of lower-rated corporate bonds. Fund managers conduct thorough credit analyses to select bonds with higher yields. The income generated from interest payments is distributed to investors. The fund’s value can fluctuate based on changes in interest rates and the creditworthiness of the issuers.Why Invest in Credit Risk Mutual Funds?
Investing in credit risk funds can be attractive for those seeking greater returns than traditional debt securities. These funds offer the potential for capital appreciation if the credit ratings of the underlying bonds improve. They also provide diversification and professional management, making them suitable for investors willing to take on higher risks for better returns.Things to Think About When Investing in Credit Risk Mutual Fund Schemes
Investing in these mutual funds involves higher returns but also increased risks. Here are some key considerations to help you make informed decisions:- Credit Quality: Assess the credit ratings of the bonds in the fund.
- Interest Rate Risk: Understand how changes in interest rates affect the fund’s value.
- Duration: Match the fund’s duration with your medium term investment horizon.
- Expense Ratio: Consider the fund’s management fees.
- Liquidity: Ensure the fund meets your liquidity needs.
- Past Performance: Review the fund’s historical returns.
The Risk Related to Credit Risk Mutual Fund Plans
Credit risk mutual funds are subject to higher credit risk due to investments in lower-rated bonds. There is a possibility of default risk by the issuers, which can lead to significant losses. Additionally, these funds are sensitive to interest rate changes, which can affect their value. Liquidity risk is also a concern if the fund cannot sell bonds quickly without impacting their price.Rules Regarding Credit Risk Fund Taxation
The best credit risk mutual funds are taxed based on the holding period. Short-term capital gains have a holding length of less than 3 years. These gains are taxed at the investor’s income tax slab rate. Long-term capital gains have a holding duration of 3 years or more. The gains are taxed at 20% after indexation benefits. These gains adjust the purchase price for inflation, reducing the taxable gains.FAQ’s
Where do credit risk funds invest in?
These mutual funds primarily invest in corporate bonds issued by companies across various sectors and regions within the country.
What types of profits is credit risk likely to yield?
The best credit risk funds aim to yield more returns through interest income and potential capital gains from bonds with higher interest rates.
Are funds at credit risk secure?
No, funds with credit risk are not entirely secure. The credit risk funds invest in lower-rated bonds with a higher risk of default. However, they offer more returns to compensate for this risk.
For whom are credit risk funds best suitable?
Credit risk funds are best suited for investors with a high risk tolerance seeking higher returns. They're appropriate for those who understand and can accept the potential for capital loss in exchange for potentially higher yields.
Do Mutual Funds with Credit Risk have high risk?
Yes, a credit risk mutual fund can be a good option with a higher risk appetite due to their investment in lower-rated bonds, which have a higher probability of default.
