What is Corporate Bond / Credit Risk Fund ?
Are the funds in which money is invested into ‘NCD’ ( Non-Convertible debentures) by mutual funds and these NCD’s are issued by private companies at predetermined rate of interest with maturity period of (3,5 and 10 years). Credit rating agency (like ICRA, CARE,etc) assigns a certain rate of rating standard (as “AAA”, “AA” etc) to each “NCD” which is being issued by company. As per scheme objectives fund manager invests money into these “NCD”
Corporate Bonds Fund :-
Mostly has exposure to “AAA” rated NCD( Non-convertible debenture).On maturity,these “NCD”are safe & secure as far as repayment is concerned.
Credit Risk Fund
Mainly has exposure to “AA” and below rated “NCD”. These ‘NCD’s are issued at higher rate of interest comparatively has moderate risk than “AAA” rated.
Advantage of Funds
- Funds offer high liquidity to investors
- Money invested into 50-70 different company’s ‘NCD’ that protects capital
- Portfolio is designed to generate 2 to 3% higher return than ‘FD’ in 3-5 years time frame
- Tax liability is reduced by 20 to 30% due to Indexation benefit, that make funds superior than Fixed deposit
- Funds generates even higher return in falling interest rate scenario
- set of varieties of funds available in this category.
Features of funds
- Funds allocate capital as per scheme investment objective
- Modified duration or average maturity of funds is kept between 3 to 5 years to align with indexation benefit.
- There is no exit load after certain period of time
- Investor can redeem money in emergency.
- Fund allows partial withdrawal all time
- SIP/SWP/STP all facilities are allowed