Top Credit Risk Fund – Credit Risk Fund

The table below shows a list of the Best credit risk mutual funds Based on AUM, NAV, and minimum SIP.

Name	AUM (Cr)	NAV (Rs)	Minimum SIP (Rs)
HDFC Credit Risk Debt Fund	7,669.18	24.31	100
ICICI Pru Credit Risk Fund	6,569.99	32.6	100
SBI Credit Risk Fund	2,401.55	45.92	1500
Nippon India Credit Risk Fund	1,027.94	35.62	100
Aditya Birla SL Credit Risk Fund	915.42	21.33	100
Kotak Credit Risk Fund	779.46	31.24	100
HSBC Credit Risk Fund	573.89	29.18	1000
Axis Credit Risk Fund	436.83	22.27	100
UTI Credit Risk Fund	343.15	18.08	500
Bandhan Credit Risk Fund	330.45	16.69	100

Introduction to Credit Risk Mutual Funds

HDFC Credit Risk Debt Fund

HDFC Credit Risk Debt Fund Direct-Growth is a Credit Risk mutual fund scheme from HDFC Mutual Fund. This fund has been in existence for 10 years and 6 months, having been launched on 06/03/2014.

HDFC Credit Risk Debt Fund Direct-Growth as a credit risk fund, manages assets valued at ₹7669.18 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 7.95%. This fund has an exit load of 0.5% and an expense ratio of 0.96%. According to SEBI, it falls under the Moderately high-risk category. The fund’s asset allocation comprises: No Equity, Debt – 90.61%, and Other – 9.39%.

ICICI Pru Credit Risk Fund

ICICI Prudential Credit Risk Fund Direct Plan-Growth is a Credit Risk mutual fund scheme from ICICI Prudential Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013. 

ICICI Prudential Credit Risk Fund Direct Plan-Growth as a credit risk fund, manages assets valued at ₹6569.99 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 8.27%. This fund has an exit load of 1% and an expense ratio of 0.77%. According to SEBI, it falls under the Moderately high-risk category. The fund’s asset allocation comprises: No Equity, Debt – 87.31%, and Other – 12.69%.

SBI Credit Risk Fund

SBI Credit Risk Fund Direct-Growth is a Credit Risk mutual fund scheme from SBI Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013.

SBI Credit Risk Fund Direct-Growth as a credit risk fund, manages assets valued at ₹2401.55 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 7.67%. This fund has an exit load of 0.75% and an expense ratio of 0.89%. According to SEBI, it falls under the Moderately high-risk category. The fund’s asset allocation comprises: No Equity, Debt – 89.7%, and Other – 10.3%.

Nippon India Credit Risk Fund

Nippon India Credit Risk Fund Direct-Growth is a Credit Risk mutual fund scheme from Nippon India Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013. 

Nippon India Credit Risk Fund Direct-Growth as a credit risk fund, manages assets valued at ₹1027.94 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 5.64%. This fund has an exit load of 1% and an expense ratio of 0.69%. According to SEBI, it falls under the Moderately high-risk category. The fund’s asset allocation comprises: No Equity, Debt – 94.07%, and Other – 5.93%.

Aditya Birla SL Credit Risk Fund

Aditya Birla Sun Life Credit Risk Fund Direct-Growth is a Credit Risk mutual fund scheme from Aditya Birla Sun Life Mutual Fund. This fund has been in existence for 9 years and 5 months, having been launched on 30/03/2015.

Aditya Birla Sun Life Credit Risk Fund Direct-Growth as a credit risk fund, manages assets valued at ₹915.42 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 7.66%. This fund has an exit load of 2% and an expense ratio of 0.67%. According to SEBI, it falls under the Moderately high-risk category. The fund’s asset allocation comprises: No Equity, Debt – 88.23%, and Other – 11.77%.

Kotak Credit Risk Fund

Kotak Credit Risk Fund Direct-Growth is a Credit Risk mutual fund scheme from Kotak Mahindra Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013.

Kotak Credit Risk Fund Direct-Growth as a credit risk fund, manages assets valued at ₹779.46 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 6.76%. This fund has an exit load of 1% and an expense ratio of 0.79%. According to SEBI, it falls under the Moderately high-risk category. The fund’s asset allocation comprises: No Equity, Debt – 85.98%, and Other – 14.02%.

HSBC Credit Risk Fund

HSBC Credit Risk Fund is a Credit Risk mutual fund scheme from HSBC Mutual Fund. This fund has been in existence for 14 years and 11 months, having been launched on 08/10/2009.

HSBC Credit Risk Fund as a credit risk fund, manages assets valued at ₹573.89 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 6.08%. This fund has an exit load of 3% and an expense ratio of 0.86%. According to SEBI, it falls under the Moderately high-risk category. The fund’s asset allocation comprises: No Equity, Debt – 99.8%, and Other – 0.2%.

Axis Credit Risk Fund

Axis Credit Risk Fund Direct-Growth is a Credit Risk mutual fund scheme from Axis Mutual Fund. This fund has been in existence for 10 years and 2 months, having been launched on 25/06/2014.

Axis Credit Risk Fund Direct-Growth as a credit risk fund, manages assets valued at ₹436.83 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 7.66%. This fund has an exit load of 1% and an expense ratio of 0.8%. According to SEBI, it falls under the Moderately high-risk category. The fund’s asset allocation comprises: No Equity, Debt – 97.04%, and Other – 2.96%.

UTI Credit Risk Fund

UTI Credit Risk Fund Direct-Growth is a Credit Risk mutual fund scheme from UTI Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013.

UTI Credit Risk Fund Direct-Growth as a credit risk fund, manages assets valued at ₹343.15 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 1.54%. This fund has an exit load of 1% and an expense ratio of 0.9%. According to SEBI, it falls under the Moderately high-risk category. The fund’s asset allocation comprises: No Equity, Debt – 90.44%, and Other – 9.56%.

Bandhan Credit Risk Fund

Bandhan Credit Risk Fund Direct-Growth is a Credit Risk mutual fund scheme from Bandhan Mutual Fund. This fund has been in existence for 7 years and 7 months, having been launched on 14/02/2017.

Bandhan Credit Risk Fund Direct-Growth as a credit risk fund, manages assets valued at ₹330.45 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 6.61%. This fund has an exit load of 1% and an expense ratio of 0.68%. According to SEBI, it falls under the Moderately high-risk category. The fund’s asset allocation comprises: No Equity, Debt – 96.35%, and Other – 3.65%.

What Are Credit Risk Funds?

Credit risk funds are a type of debt mutual fund that primarily invests in lower-rated corporate bonds, typically rated below AA. These bonds carry higher credit risk, meaning there’s a greater chance of default but offer higher returns.

These funds aim to generate higher yields by taking on increased credit risk. Fund managers carefully select bonds they believe will improve in credit rating over time, which can enhance returns as the bonds appreciate in value.

While credit risk funds can offer attractive returns, they come with higher risk, especially during economic downturns or when companies face financial difficulties. Investors should evaluate their risk tolerance before investing.

Features of the Best Credit Risk Mutual Fund India

The main features of the best credit risk mutual funds in India include a well-diversified portfolio of lower-rated bonds, a strong track record of returns, experienced fund managers, and efficient risk management to minimize potential defaults while maximizing returns.

• Diversified Portfolio: The best funds maintain a diversified portfolio of lower-rated corporate bonds, reducing the impact of any single default. This balance of different industries and issuers helps spread the risk and optimize overall returns.
• Strong Track Record: A consistent history of high returns, even during volatile markets, reflects the fund’s ability to handle risk effectively. Investors should look for funds with solid past performance over 3-5 years as a key indicator.
• Experienced Fund Managers: Skilled fund managers who can assess corporate creditworthiness are crucial. Their expertise in selecting bonds with the potential for credit upgrades or recovery can greatly impact the fund’s overall performance.
• Efficient Risk Management: The best funds employ advanced risk management techniques, such as continuous credit monitoring and timely exits from high-risk securities. This helps minimize default risks and maintain portfolio stability in adverse market conditions.

Top Credit Risk Mutual Funds Based on Expense Ratio

The table below shows the Best-performing credit risk mutual funds Based on the highest to lowest expense ratio.

Name	Expense Ratio (%)	Minimum SIP (Rs)
Bank of India Credit Risk Fund	1.18	1000
HDFC Credit Risk Debt Fund	0.96	100
UTI Credit Risk Fund	0.9	500
SBI Credit Risk Fund	0.89	1500
HSBC Credit Risk Fund	0.86	1000
Axis Credit Risk Fund	0.8	100
Kotak Credit Risk Fund	0.79	100
Baroda BNP Paribas Credit Risk Fund	0.79	500
ICICI Pru Credit Risk Fund	0.77	100
Nippon India Credit Risk Fund	0.69	100

Best Credit Risk Mutual Funds Based on 3Y CAGR

The table below shows the Best credit risk mutual funds Based on the Highest 3Y CAGR.

Name	CAGR 3Y (Cr)	Minimum SIP (Rs)
Bank of India Credit Risk Fund	39.51	1000
UTI Credit Risk Fund	12.02	500
DSP Credit Risk Fund	11.09	100
Baroda BNP Paribas Credit Risk Fund	9.89	500
Aditya Birla SL Credit Risk Fund	8.31	100
Invesco India Credit Risk Fund	7.8	1000
ICICI Pru Credit Risk Fund	7.35	100
Nippon India Credit Risk Fund	7.14	100
SBI Credit Risk Fund	7.13	1500
Axis Credit Risk Fund	6.83	100

List Of Credit Risk Mutual Funds Based on Exit Load 

The table below shows Best Performing credit risk mutual funds In India Based on Exit Load, i.e., the fee that the AMC charges investors when they exit or redeem their fund units.

Name	AMC	Exit Load (%)
Invesco India Credit Risk Fund	Invesco Asset Management Company Pvt Ltd.	4
Bank of India Credit Risk Fund	Bank of India Investment Managers Private Limited	3
HSBC Credit Risk Fund	HSBC Global Asset Management (India) Private Limited	3
Aditya Birla SL Credit Risk Fund	Aditya Birla Sun Life AMC Limited	2
UTI Credit Risk Fund	UTI Asset Management Company Private Limited	1
DSP Credit Risk Fund	DSP Investment Managers Private Limited	1
Baroda BNP Paribas Credit Risk Fund	Baroda BNP Paribas Asset Management India Pvt. Ltd.	1
ICICI Pru Credit Risk Fund	ICICI Prudential Asset Management Company Limited	1
Nippon India Credit Risk Fund	Nippon Life India Asset Management Limited	1
Axis Credit Risk Fund	Axis Asset Management Company Ltd.	1

Credit Risk Mutual Funds Returns 

The table below shows credit risk mutual funds Returns Based on 1-Year returns.

Name	Absolute Returns – 1Y (%)	Minimum SIP (Rs)
DSP Credit Risk Fund	16.78	100
Invesco India Credit Risk Fund	10.14	1000
Kotak Credit Risk Fund	10.14	100
Aditya Birla SL Credit Risk Fund	9.74	100
ICICI Pru Credit Risk Fund	9.36	100
Baroda BNP Paribas Credit Risk Fund	8.98	500
HDFC Credit Risk Debt Fund	8.74	100
Nippon India Credit Risk Fund	8.73	100
SBI Credit Risk Fund	8.61	1500
Axis Credit Risk Fund	8.52	100

Historical Performance of Credit Risk Funds

The table below shows the Historical Performance Of credit risk mutual funds based on 5Y return.

Name	CAGR 5Y (Cr)	Minimum SIP (Rs)
Bank of India Credit Risk Fund	10.49	1000
DSP Credit Risk Fund	8.81	100
Baroda BNP Paribas Credit Risk Fund	8.78	500
ICICI Pru Credit Risk Fund	8.27	100
HDFC Credit Risk Debt Fund	7.95	100
SBI Credit Risk Fund	7.67	1500
Aditya Birla SL Credit Risk Fund	7.66	100
Axis Credit Risk Fund	7.66	100
Invesco India Credit Risk Fund	7.58	1000
Kotak Credit Risk Fund	6.76	100

Factors to Consider When Investing in Credit Risk Mutual Funds

The main factors to consider when investing in credit risk mutual funds include the fund’s credit quality, historical performance, fund manager expertise, and your personal risk tolerance. These factors help assess whether the fund aligns with your financial goals and risk appetite.

• Credit Quality: Analyze the overall credit rating of the bonds in the fund’s portfolio. Lower-rated bonds carry higher risks, so understanding the fund’s exposure to these bonds is crucial for evaluating potential returns versus risks.

• Historical Performance:  Review the fund’s past performance, especially during market downturns. A fund with consistent returns across different economic conditions is more likely to weather volatility and manage credit risk effectively.

• Fund Manager Expertise: The fund manager’s experience in handling credit risk funds is vital. Skilled managers can identify undervalued bonds with recovery potential and effectively manage risk, directly impacting the fund’s long-term success.

• Personal Risk Tolerance:  Ensure that the level of risk in the fund matches your personal financial goals and risk tolerance. Credit risk funds are more suited for investors with a higher appetite for risk and a longer investment horizon.

How to Invest in Top Credit Risk Funds?

To invest in top credit risk funds, use a trusted brokerage platform. These platforms provide access to various mutual funds and allow you to compare performance, fees, and risk levels before selecting a suitable credit risk fund.

Evaluate the fund’s credit quality, past returns, and the fund manager’s expertise. Alice Blue offers detailed analytics and ratings to help you make informed decisions, ensuring the fund aligns with your investment goals and risk tolerance.

Once you’ve selected a fund, easily invest through the brokerage platform by completing an online transaction. Regularly monitor your investment performance via the platform’s tools to ensure long-term growth.

Impact of Market Trends on Top Credit Risk Mutual Funds

Market trends significantly affect top credit-risk mutual funds. During bullish markets, these funds tend to perform well as companies improve financially, reducing default risk. Investors’ appetite for higher returns also increases, boosting demand for lower-rated corporate bonds.

However, in bearish or uncertain markets, credit risk funds can suffer. Economic downturns may increase corporate defaults, reducing bond values. Investors typically shift towards safer assets, leading to potential losses in these funds as bond prices decline due to heightened risk perceptions.

How Credit Risk Funds Perform in Volatile Markets?

In volatile markets, credit risk funds often face increased challenges as the risk of corporate defaults rises. Lower-rated bonds may lose value due to investor concerns, causing fund performance to dip as risk-averse behavior drives bond prices down.

Despite the risks, credit risk funds can still offer returns if managed well. Fund managers may focus on bonds with improving fundamentals or sectors less impacted by market volatility, aiming to capture opportunities from mispriced securities or improving credit ratings.

Advantages of Investing in Credit Risk Mutual Funds

The main advantages of investing in credit risk mutual funds include higher yield opportunities, improved portfolio diversification, access to a professionally managed bond portfolio, and the potential for capital gains as bonds appreciate with credit rating upgrades.

• Higher Yield Opportunities: Credit risk mutual funds invest in lower-rated bonds, offering higher interest rates compared to safer debt instruments. This allows investors to earn potentially better returns, compensating for the increased credit risk associated with these funds.

• Portfolio Diversification: Adding credit risk funds diversifies your portfolio by including corporate bonds, reducing overall exposure to equities or government bonds. This diversification balances risk and returns, providing a broader asset base to enhance stability and growth.

• Professional Bond Management: Experienced fund managers handle bond selection, credit analysis, and risk management, making investment decisions based on market trends and corporate fundamentals. Their expertise helps reduce the risk of defaults while optimizing the potential for returns.

• Potential for Capital Gains: As companies improve their financial standing, bonds within credit risk funds can experience credit rating upgrades, leading to capital appreciation. Investors benefit from both interest income and the price appreciation of these upgraded bonds.

Risks of Investing in Credit Risk Mutual Funds

The main risks of investing in credit risk mutual funds include default risk, interest rate fluctuations, liquidity issues, and market volatility. These risks can affect the fund’s performance, making it essential for investors to carefully assess their risk tolerance before investing.

• Default Risk: Credit risk funds invest in lower-rated bonds, which carry a higher risk of default. If the issuing company fails to meet its debt obligations, it could lead to significant losses for the investor.

• Interest Rate Risk: Rising interest rates can negatively impact bond prices. Since credit risk funds invest in bonds, an increase in rates could reduce the value of the bonds in the portfolio, affecting overall fund performance.

• Liquidity Risk: Lower-rated bonds often have less liquidity, making it harder to sell them during adverse market conditions. Investors may face challenges when trying to exit the fund or may have to sell at a loss.

• Market Volatility: Credit risk funds are sensitive to broader economic and market conditions. Economic downturns or sector-specific issues can lead to increased volatility in these funds, potentially resulting in substantial short-term losses for investors.

Contribution of Credit Risk Funds to Portfolio Diversification

Credit risk funds contribute to portfolio diversification by providing exposure to lower-rated corporate bonds, which offer higher returns than traditional debt instruments. This can enhance overall portfolio returns while spreading risk across different asset classes and credit profiles.

These funds also reduce reliance on equity market performance, as their returns are tied to bond ratings and corporate creditworthiness. By including credit risk funds, investors can achieve a balanced portfolio that captures both higher income potential and varied risk factors, improving long-term stability.

Who Should Invest in Credit Risk Funds?

Credit risk funds are suited for investors with a higher risk appetite seeking better returns than traditional debt funds. These individuals should have a long-term investment horizon, ideally 3-5 years, to withstand potential short-term market volatility.

Investors looking to diversify their portfolio and willing to accept credit-related risks can benefit from these funds. They are ideal for those comfortable with the uncertainty of corporate bond ratings, aiming for higher yields in exchange for potential default risks.

Impact of Fund Manager Expertise on Credit Risk Mutual Funds Performance

Fund manager expertise plays a crucial role in credit risk mutual fund performance. Skilled managers effectively analyze lower-rated bonds, selecting those with strong recovery potential, helping to balance risk and reward, and ultimately improving the fund’s return prospects.

Experienced managers also navigate volatile markets better by anticipating shifts in credit conditions and adjusting the portfolio accordingly. Their ability to assess corporate fundamentals and market trends can significantly reduce default risks, enhancing fund stability and long-term performance.

How Much Money Should I Invest In Credit Risk Funds?

The amount to invest in credit risk funds depends on your risk tolerance, financial goals, and investment horizon. Typically, allocate a small portion, around 10-15% of your portfolio, especially if you’re comfortable with moderate-to-high risk.

Consider your overall financial situation and diversify with safer assets. Credit risk funds are ideal for investors with a long-term perspective, seeking higher returns while accepting possible short-term volatility. Adjust the allocation based on market conditions and personal preferences.

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Disclaimer: The above article is written for educational purposes, and the companies’ data mentioned in the article may change over time.