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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

Filters
logo DSP Credit Risk Fund - Direct Growth

22.18%

Fund Size (Cr.) - 191

Invest
logo HSBC Credit Risk Fund - Direct Growth

21.29%

Fund Size (Cr.) - 574

Invest
logo Aditya Birla SL Credit Risk Fund - Dir Growth

14.66%

Fund Size (Cr.) - 914

Invest
logo Invesco India Credit Risk Fund - Direct Growth

10.68%

Fund Size (Cr.) - 140

Invest
logo ICICI Pru Credit Risk Fund - Direct Growth

10.43%

Fund Size (Cr.) - 6,570

Invest
logo Nippon India Credit Risk Fund - Direct Growth

9.89%

Fund Size (Cr.) - 1,028

Invest
logo SBI Credit Risk Fund - Direct Growth

8.80%

Fund Size (Cr.) - 2,370

Invest
logo AXIS Credit Risk Fund - Direct Growth

9.59%

Fund Size (Cr.) - 437

Invest
logo Baroda BNP Paribas Credit Risk Fund-Dir Growth

9.00%

Fund Size (Cr.) - 142

Invest
logo Kotak Credit Risk Fund - Direct Growth

10.20%

Fund Size (Cr.) - 779

Invest
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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.
     

Popular Credit Risk Mutual Funds

  • Min SIP Investment Amt
  • ₹ ₹ 100
  • AUM (Cr.)
  • ₹ 191
  • 3Y Return
  • 15.63%

  • Min SIP Investment Amt
  • ₹ ₹ 1000
  • AUM (Cr.)
  • ₹ 574
  • 3Y Return
  • 12.02%

  • Min SIP Investment Amt
  • ₹ ₹ 100
  • AUM (Cr.)
  • ₹ 914
  • 3Y Return
  • 11.77%

  • Min SIP Investment Amt
  • ₹ ₹ 1000
  • AUM (Cr.)
  • ₹ 140
  • 3Y Return
  • 10.66%

  • Min SIP Investment Amt
  • ₹ ₹ 100
  • AUM (Cr.)
  • ₹ 6,570
  • 3Y Return
  • 9.19%

  • Min SIP Investment Amt
  • ₹ ₹ 100
  • AUM (Cr.)
  • ₹ 1,028
  • 3Y Return
  • 9.18%

  • Min SIP Investment Amt
  • ₹ ₹ 500
  • AUM (Cr.)
  • ₹ 2,370
  • 3Y Return
  • 8.84%

  • Min SIP Investment Amt
  • ₹ ₹ 1000
  • AUM (Cr.)
  • ₹ 437
  • 3Y Return
  • 8.77%

  • Min SIP Investment Amt
  • ₹ ₹ 500
  • AUM (Cr.)
  • ₹ 142
  • 3Y Return
  • 8.75%

  • Min SIP Investment Amt
  • ₹ ₹ 100
  • AUM (Cr.)
  • ₹ 779
  • 3Y Return
  • 8.65%

Other Calculators

FAQs

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.

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.

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.

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.

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.

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.

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).

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