Up until early 2020, debt funds, even other than credit risk funds, were used to investing in lower-rated securities to get a kicker in returns. But after frequent defaults and the Franklin Templeton crisis in April 2020, debt fund managers have become more careful
Barring a couple of schemes in the category, most credit risk funds have delivered reasonable returns in the last three years
There have been steady outflows in the credit risk fund category
Investors looking for a steady income and wanting to minimize their risks should stay away from credit-risk funds
SIP flows holding above Rs 8,000 crore in May despite businesses being at standstill since couple of months is encouraging
The collapse of Franklin Templeton’s debt schemes added to panic redemption
Credit risk funds category continued to suffer in the month of April as well more so after Franklin Templeton shut its six debt funds including a credit risk fund citing liquidity constraints
AUM of credit risk fund category has been falling and the category has seen continuous outflows.
The liquidity facility will help avoid a one-off event snowballing into systemic risk
With 26 years of research experience and 19 years of portfolio management experience, Kamath is said to be a key decision-maker on investing in sub-AAA rated bonds or any form of structured debt.
The regulators need to step in immediately to stop any contagion
Investors need to stay cautious and avoid chasing yields
The good portfolio need not come under redemption pressure and the fund manager can focus on investment management.
Liquid funds continued to see robust inflows of Rs 79,428 crore in August as against inflows of Rs 45,441 lakh crore in July