What kind of returns can I get from credit risk funds?

Returns from credit risk funds can be higher than traditional debt funds, but they also come with greater risk. Actual returns depend on market conditions and the performance of the lower-rated bonds in the portfolio.

What is an example of credit risk?

Credit risk occurs when a borrower fails to repay a loan or interest. For example, if a company issuing a bond defaults on payment, investors holding that bond face a credit risk.

Is it safe to invest in a credit risk fund?

Credit risk funds carry higher risk than regular debt funds due to their exposure to lower-rated securities. They are not entirely “safe” and are better suited for investors with moderate to high risk tolerance.

Is it a good time to invest in a credit risk fund?

The timing depends on your financial goals and risk appetite. If you're comfortable with short-term volatility and aiming for higher returns over 2–3 years, it could be a suitable time to consider investing.

What is the best credit risk rating?

In credit ratings, ‘AAA’ is considered the safest and highest rating, indicating very low credit risk. Credit risk funds, however, typically invest in lower-rated bonds to aim for better returns.

Is a credit risk fund the same as a debt fund?

Credit risk funds are a type of debt fund, but not all debt funds are credit risk funds. These specifically invest in lower-rated bonds and carry more risk compared to other debt categories.

What are the three types of credit risk?

The three main types of credit risk are default risk (non-payment), credit spread risk (changes in yield), and downgrade risk (fall in credit rating of an issuer).

Credit Risk Mutual Funds

Credit Risk Mutual Funds are a category of debt mutual funds that primarily invest in lower-rated corporate bonds and securities. These funds aim to earn higher returns by taking on credit risk. Unlike traditional debt funds that focus on high-rated instruments, credit risk mutual funds strategically allocate assets to instruments rated below AA. While they offer the potential for better yields, they also carry greater risk. Investors seeking enhanced returns from the debt segment may find credit risk mutual funds an intriguing option, if they're comfortable with the trade-off.

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List of Credit Risk Mutual Funds

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Search Result - 14 Mutual Funds

Fund Name	Fund Size (Cr.)	3Y Returns	5Y Returns	Invest Now
DSP Credit Risk Fund - Direct Growth Debt Credit Risk Fund	287	16.91%	13.34%	Invest
Aditya Birla SL Credit Risk Fund - Dir Growth Debt Credit Risk Fund	1,532	13.26%	11.00%	Invest
HSBC Credit Risk Fund - Direct Growth Debt Credit Risk Fund	460	11.86%	9.51%	Invest
Bank of India Credit Risk Fund - Direct Debt Credit Risk Fund	92	10.08%	27.78%	Invest
Invesco India Credit Risk Fund - Direct Growth Debt Credit Risk Fund	166	9.78%	8.53%	Invest
ICICI Pru Credit Risk Fund - Direct Growth Debt Credit Risk Fund	6,320	9.22%	8.13%	Invest
Nippon India Credit Risk Fund - Direct Growth Debt Credit Risk Fund	1,556	9.04%	8.00%	Invest
AXIS Credit Risk Fund - Direct Growth Debt Credit Risk Fund	375	8.95%	7.76%	Invest
Kotak Credit Risk Fund - Direct Growth Debt Credit Risk Fund	770	8.74%	6.89%	Invest
SBI Credit Risk Fund - Direct Growth Debt Credit Risk Fund	2,181	8.66%	7.80%	Invest

Fund Name	1Y Returns	Rating	Fund Size (Cr.)
DSP Credit Risk Fund - Direct Growth Debt Credit Risk Fund	11.47% Fund Size (Cr.) - 287 Invest
Aditya Birla SL Credit Risk Fund - Dir Growth Debt Credit Risk Fund	13.26% Fund Size (Cr.) - 1,532 Invest
HSBC Credit Risk Fund - Direct Growth Debt Credit Risk Fund	6.80% Fund Size (Cr.) - 460 Invest
Bank of India Credit Risk Fund - Direct Debt Credit Risk Fund	17.79% Fund Size (Cr.) - 92 Invest
Invesco India Credit Risk Fund - Direct Growth Debt Credit Risk Fund	8.64% Fund Size (Cr.) - 166 Invest
ICICI Pru Credit Risk Fund - Direct Growth Debt Credit Risk Fund	9.15% Fund Size (Cr.) - 6,320 Invest
Nippon India Credit Risk Fund - Direct Growth Debt Credit Risk Fund	8.20% Fund Size (Cr.) - 1,556 Invest
AXIS Credit Risk Fund - Direct Growth Debt Credit Risk Fund	9.10% Fund Size (Cr.) - 375 Invest
Kotak Credit Risk Fund - Direct Growth Debt Credit Risk Fund	8.40% Fund Size (Cr.) - 770 Invest
SBI Credit Risk Fund - Direct Growth Debt Credit Risk Fund	8.58% Fund Size (Cr.) - 2,181 Invest

Features of Credit Risk Mutual Funds

Credit Risk Premium - These funds offer attractive returns through credit risk premiums, which are directly linked to the riskiness of the bonds they hold. The lower the credit rating of the bond, the higher the potential premium, rewarding investors for taking on added risk.
Potential for Capital Appreciation - Credit risk funds often invest in bonds that have room for credit rating upgrades. If and when such upgrades occur, they can lead to capital appreciation, offering an added advantage to long-term investors.
Accrual Income - A notable Credit Risk Mutual Fund feature is the regular income from interest-bearing securities. This accrual income is factored into the bond’s market price, which in turn pushes up the fund’s NAV over time.
Not Suited for All - These funds carry a higher default and liquidity risk compared to traditional debt funds. This Credit Risk Mutual Fund feature makes them more suitable for investors who are comfortable with volatility and seeking better returns—not for those prioritising capital safety.

Who Should Invest in Credit Risk Mutual Funds?

Investors with a Medium-Term Investment Horizon - Credit risk funds are generally suitable for those planning to invest for a period of 2 to 3 years. This time frame allows the fund to ride out market fluctuations and potentially benefit from credit rating upgrades in the underlying securities.
Investors Seeking Higher Yields Than Traditional Debt Options - If your goal is to earn better returns than what conventional fixed-income instruments offer, you may consider to invest in a Credit Risk Mutual Fund. These funds carry more credit risk but also offer the potential for enhanced yields, which then makes them attractive to investors aiming for a return boost within the debt category.
Investors Comfortable with Moderate to High Risk - One key aspect of Credit Mutual Fund Investment is the higher level of risk involved. These funds invest in lower-rated corporate bonds, which come with a greater possibility of default. Investors should have the ability to absorb short-term volatility and a tolerance for credit events.

How to Invest in Credit Risk Mutual Funds?

Sign Up on 5paisa - Visit 5paisa.com and create your free account. The registration process is quick and completely online.
Complete KYC Seamlessly - Upload your documents and get KYC-verified. 5paisa simplifies this step to help you start your Credit Mutual Fund Investment without delays.
Explore Credit Risk Funds - Use the platform’s search and filter tools to compare credit risk mutual fund options based on returns, ratings, and investment strategy.
Evaluate and Choose - Review detailed fund insights, including risk levels and past performance, to make informed decisions before you invest in Credit Risk Mutual Fund schemes.
Invest in a Few Clicks - Whether you prefer SIP or lump sum, 5paisa makes investing fast, paperless, and hassle-free, ideal for beginners and seasoned investors alike.

Factors to Consider While Investing in Credit Risk Mutual Funds

Align with Financial Goals - Before starting your Credit Mutual Fund Investment, ensure it fits your financial plan. Credit risk funds may not suit short-term goals due to their higher volatility and time needed to deliver returns.
Limit Portfolio Exposure - While these funds offer the potential for higher returns, it’s wise to allocate only 10%–20% of your total investment. Avoid putting your entire corpus into one category when you invest in Credit Risk Mutual Fund schemes.
Fund Size Matters - Look for funds with a large asset base or corpus. Larger funds can spread risk better by diversifying across more instruments.
Check the Expense Ratio - Lower expense ratios help retain more of your returns. It is always better to compare options before investing.
Understand Exit Loads - Exit charges vary across schemes. Some funds may charge a fee if units are redeemed within a year, especially beyond a certain threshold.

What are the Advantages of Investing Credit Risk Funds?

Higher Return Potential - One major Credit Mutual Fund benefit is the potential to earn better returns compared to traditional debt funds, due to investments in lower-rated but high-yield bonds.
Opportunity for Capital Appreciation - If the credit rating of a bond improves, its market value increases, resulting in gains for the fund and, in turn, the investor.
Regular Interest Income - These funds invest in interest-bearing instruments, offering investors the benefit of periodic income through accrual.
Diversification within Debt Portfolio - Adding credit risk funds can bring diversification to your fixed-income investments, helping balance risk and reward across your portfolio.
Suitable for Moderate Risk-Takers - A Credit Mutual Fund benefit is that it bridges the gap between low-risk debt and high-risk equity, ideal for those comfortable with calculated risks.

Risks Involved with Credit Risk Mutual Funds

Credit Default Risk: These funds invest in lower-rated bonds, which come with a higher chance that the issuer may fail to repay interest or principal on time.
Liquidity Risk: In times of market stress, it may be difficult to sell certain bonds quickly without a price impact, which can affect the fund’s NAV
Market Volatility: Credit risk funds are sensitive to changes in interest rates, credit events, and economic cycles, leading to fluctuations in fund performance.
Not Ideal for Short-Term Needs: A key consideration before making a Credit Mutual Fund Investment is time horizon, these funds are not suitable for short-term financial goals due to their inherent volatility.
Fund Manager Dependency: The performance of these funds often relies heavily on the fund manager’s ability to select quality lower-rated bonds and manage risk effectively.

Taxability of Credit Risk Mutual Funds

For those making a Credit Mutual Fund Investment on or after April 1, 2023, tax treatment has changed significantly. Regardless of how long you hold the investment, any gains, whether short-term or long-term are now taxed according to your individual income tax slab. The earlier distinction between short-term capital gains (STCG) and long-term capital gains (LTCG) no longer applies. Essentially, returns from these funds are added to your total income and taxed at the applicable marginal rate.

Popular Credit Risk Mutual Funds

Fund Name
Min Investment Amt
AUM (Cr)
3Y Returns

Credit Risk Mutual Funds

List of Credit Risk Mutual Funds

Category

Sub Category

Rating

Features of Credit Risk Mutual Funds

Who Should Invest in Credit Risk Mutual Funds?

How to Invest in Credit Risk Mutual Funds?

Factors to Consider While Investing in Credit Risk Mutual Funds

What are the Advantages of Investing Credit Risk Funds?

Risks Involved with Credit Risk Mutual Funds

Taxability of Credit Risk Mutual Funds

Popular Credit Risk Mutual Funds

DSP Credit Risk Fund - Direct Growth

₹ 100

₹ 287

16.91%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 287

3Y Returns

16.91%

Aditya Birla SL Credit Risk Fund - Dir Growth

₹ 100

₹ 1,532

13.26%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 1,532

3Y Returns

13.26%

HSBC Credit Risk Fund - Direct Growth

₹ 1000

₹ 460

11.86%

Min SIP Investment Amt

₹ 1000

AUM (Cr.)

₹ 460

3Y Returns

11.86%

Bank of India Credit Risk Fund - Direct

-

₹ 92

10.08%

Min SIP Investment Amt

-

AUM (Cr.)

₹ 92

3Y Returns

10.08%

Invesco India Credit Risk Fund - Direct Growth

₹ 1000

₹ 166

9.78%

Min SIP Investment Amt

₹ 1000

AUM (Cr.)

₹ 166

3Y Returns

9.78%

ICICI Pru Credit Risk Fund - Direct Growth

₹ 100

₹ 6,320

9.22%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 6,320

3Y Returns

9.22%

Nippon India Credit Risk Fund - Direct Growth

₹ 100

₹ 1,556

9.04%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 1,556

3Y Returns

9.04%

AXIS Credit Risk Fund - Direct Growth

₹ 1000

₹ 375

8.95%

Min SIP Investment Amt

₹ 1000

AUM (Cr.)

₹ 375

3Y Returns

8.95%

Kotak Credit Risk Fund - Direct Growth

₹ 100

₹ 770

8.74%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 770

3Y Returns

8.74%

SBI Credit Risk Fund - Direct Growth

₹ 500

₹ 2,181

8.66%

Min SIP Investment Amt

₹ 500

AUM (Cr.)

₹ 2,181

3Y Returns

8.66%

Other Calculators

Frequently Asked Questions

Open Free Demat Account

Credit Risk Mutual Funds

List of Credit Risk Mutual Funds

Category

Sub Category

Rating

Features of Credit Risk Mutual Funds

Who Should Invest in Credit Risk Mutual Funds?

How to Invest in Credit Risk Mutual Funds?

Factors to Consider While Investing in Credit Risk Mutual Funds

What are the Advantages of Investing Credit Risk Funds?

Risks Involved with Credit Risk Mutual Funds

Taxability of Credit Risk Mutual Funds

Popular Credit Risk Mutual Funds

DSP Credit Risk Fund - Direct Growth ₹ 100 ₹ 287 16.91% Min SIP Investment Amt ₹ 100 AUM (Cr.) ₹ 287 3Y Returns 16.91%

Aditya Birla SL Credit Risk Fund - Dir Growth ₹ 100 ₹ 1,532 13.26% Min SIP Investment Amt ₹ 100 AUM (Cr.) ₹ 1,532 3Y Returns 13.26%

HSBC Credit Risk Fund - Direct Growth ₹ 1000 ₹ 460 11.86% Min SIP Investment Amt ₹ 1000 AUM (Cr.) ₹ 460 3Y Returns 11.86%

Bank of India Credit Risk Fund - Direct - ₹ 92 10.08% Min SIP Investment Amt - AUM (Cr.) ₹ 92 3Y Returns 10.08%

Invesco India Credit Risk Fund - Direct Growth ₹ 1000 ₹ 166 9.78% Min SIP Investment Amt ₹ 1000 AUM (Cr.) ₹ 166 3Y Returns 9.78%

ICICI Pru Credit Risk Fund - Direct Growth ₹ 100 ₹ 6,320 9.22% Min SIP Investment Amt ₹ 100 AUM (Cr.) ₹ 6,320 3Y Returns 9.22%

Nippon India Credit Risk Fund - Direct Growth ₹ 100 ₹ 1,556 9.04% Min SIP Investment Amt ₹ 100 AUM (Cr.) ₹ 1,556 3Y Returns 9.04%

AXIS Credit Risk Fund - Direct Growth ₹ 1000 ₹ 375 8.95% Min SIP Investment Amt ₹ 1000 AUM (Cr.) ₹ 375 3Y Returns 8.95%

Kotak Credit Risk Fund - Direct Growth ₹ 100 ₹ 770 8.74% Min SIP Investment Amt ₹ 100 AUM (Cr.) ₹ 770 3Y Returns 8.74%

SBI Credit Risk Fund - Direct Growth ₹ 500 ₹ 2,181 8.66% Min SIP Investment Amt ₹ 500 AUM (Cr.) ₹ 2,181 3Y Returns 8.66%

Other Calculators

Frequently Asked Questions

Open Free Demat Account

DSP Credit Risk Fund - Direct Growth

₹ 100

₹ 287

16.91%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 287

3Y Returns

16.91%

Aditya Birla SL Credit Risk Fund - Dir Growth

₹ 100

₹ 1,532

13.26%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 1,532

3Y Returns

13.26%

HSBC Credit Risk Fund - Direct Growth

₹ 1000

₹ 460

11.86%

Min SIP Investment Amt

₹ 1000

AUM (Cr.)

₹ 460

3Y Returns

11.86%

Bank of India Credit Risk Fund - Direct

-

₹ 92

10.08%

Min SIP Investment Amt

-

AUM (Cr.)

₹ 92

3Y Returns

10.08%

Invesco India Credit Risk Fund - Direct Growth

₹ 1000

₹ 166

9.78%

Min SIP Investment Amt

₹ 1000

AUM (Cr.)

₹ 166

3Y Returns

9.78%

ICICI Pru Credit Risk Fund - Direct Growth

₹ 100

₹ 6,320

9.22%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 6,320

3Y Returns

9.22%

Nippon India Credit Risk Fund - Direct Growth

₹ 100

₹ 1,556

9.04%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 1,556

3Y Returns

9.04%

AXIS Credit Risk Fund - Direct Growth

₹ 1000

₹ 375

8.95%

Min SIP Investment Amt

₹ 1000

AUM (Cr.)

₹ 375

3Y Returns

8.95%

Kotak Credit Risk Fund - Direct Growth

₹ 100

₹ 770

8.74%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 770

3Y Returns

8.74%

SBI Credit Risk Fund - Direct Growth

₹ 500

₹ 2,181

8.66%

Min SIP Investment Amt

₹ 500

AUM (Cr.)

₹ 2,181

3Y Returns

8.66%