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Bandhan Credit Risk Fund - Direct Plan

An open ended debt scheme predominantly investing in AA and below rated corporate bonds. A scheme with moderate interest rate risk and moderate credit risk.

DebtInception Date:03/03/2017
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What is the Meaning of a Credit Risk Fund?

Credit risk funds are a type of debt mutual fund scheme that invest in low-quality debt securities. Credit quality is determined by the financial strength of the company issuing the bonds. Credit risk mutual funds invest in securities rated AA equivalent and or below the AA rating. Due to the lowered financial strength of the companies issuing these bonds, these funds are known as ‘credit risk funds.’

Credit risk funds typically have relatively higher level of credit risk. These funds may be considered a high risk-return investment. However, credit risk fund returns may be more significant than other low-risk debt funds. Moreover, credit risk funds are relatively low in liquidity; this lack of liquidity increases the potential risk.

Credit risk mutual funds are mandated to invest 65% of the funds assets in corporate bonds rated AA or lower. The remaining assets can be invested in other debt securities. As the fund does not invest in equities the relative growth potential is low.

Credit risk mutual funds are a relatively less diverse investment option as a significant part of their corpus is invested in bonds and debt securities. The lack of diversification in asset classes along with investments in low-rated bonds increases the level of risk in the fund.

All mutual funds are subject to risks; it is vital for investors to understand the risks associated with any scheme before investing. Securities that a credit risk fund invests in are vulnerable to default risk. Additionally, the credit rating of underlying securities may change and are subject to increase or decrease over the course of time.

As credit funds are predominantly a debt fund they are taxed similar to debt funds. STCG tax is levied on investments held for less than three years according to the income tax slab of the investor. LTCG is levied on investments held for more than three years at 20%.

  • Min Investment 5,000
  • Min SIP Amount 1,000
  • Exit Load
    1%

    1%  if redeemed / switched out within 365 days from the date of allotment

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Annualised Returns(as on 30th Jun, 2024)6.35%1yr4.91%3yr5.71%5yr
NAV 15.2864 as on 10/07/20241 Day Change: 0.01(0.04%)

Scheme is suitable as 'Satellite' debt allocation and is recommended for a minimum investment horizon of more than 3 years

Tier 1 Benchmark : NIFTY Credit Risk Bond Index B-IIAlternate Benchmark : CRISIL 10 Year Gilt Index

Tier 2 Benchmark : 65% NIFTY AA Short Duration Bond Index + 35% NIFTY AAA Short Duration Bond Index

Performance as on 28th June 2024

Scheme NamesCAGR Returns (%)Current value of Investment of 10,000
1 year3 year5 year10 year03/03/2017 Since inception1 year3 year5 year10 year03/03/2017 Since inception
Bandhan Credit Risk Fund - Regular Plan - Growth6.354.915.71N.A.5.9210,63711,54713,203N.A.15,245
8.117.418.21N.A.8.0410,80812,39014,845N.A.17,620
7.476.917.50N.A.7.3810,74512,21714,361N.A.16,845
6.904.165.507.035.4610,69211,30213,07619,73414,760
^ Tier 1 Benchmark   |   ^^ Alternate Benchmark   |   ^^^ Tier 2 Benchmark

This fund is managed by Mr. Gautam Kaul (w.e.f 16/07/2022) & Mr. Debraj Lahiri (w.e.f 03/04/2023)

View fund performance of other funds managed by Mr. Gautam Kaul, Mr. Debraj Lahiri

Past performance may or may not be sustained in future.
Regular and Direct Plans have different expense structure. Direct Plan shall have a lower expense ratio excluding distribution expenses, commission expenses etc.

Taxation:

For taxation, please refer the link :  https://bit.ly/3spfzbo

Bandhan Credit Risk Fund

(Scheme Risk-o-meter)

Investors understand that their principal will be at Moderately High Risk.

NIFTY Credit Risk Bond Index B-II

(Tier 1 Benchmark Risk-o-meter)

65% NIFTY AA Short Duration Bond Index + 35% NIFTY AAA Short Duration Bond Index

(Tier 2 Benchmark Risk-o-meter)

This product is suitable for investors who are seeking* :

  • To generate optimal returns over medium to long term.
  • To predominantly invest in a portfolio of corporate debt securities across the credit spectrum.

Who Should Invest in Credit Risk Mutual Funds?

Credit risk funds are a high-risk investment option as they predominantly invest in low-rated bonds. Investors with a high-risk appetite may potentially benefit from these funds. Credit risk mutual funds are vulnerable to liquidity risk, default risk, interest rate risk and credit risk. Moreover, credit risk mutual funds are a long-term investment option. Investors seeking potentially high-risk-return investments with a long-term investment horizon may potentially benefit from investing in credit risk funds.

Credit risk mutual funds are not suitable for investors seeking diversification of their portfolio as they invest predominantly in debt securities and bonds. Investors seeking to invest in low-rated corporate debt securities may be suitable for this scheme.

Credit risk funds may be suitable for investors in the higher tax slab, eg. 30%, as LTCG are levied on units held for longer than three years at 20%.

FAQs on Credit Risk Funds

What are credit risk funds?

Credit risk mutual funds are a type of debt fund scheme that invest predominantly in bonds rated AA or lower. The fund attempts to generate potential returns by investing in high-risk securities.

What is credit risk in mutual funds?

Credit risk in mutual funds refers to the risk of default of the issuer in repaying the principal or interest amount. Low-quality securities (AA, A, BB etc-rated securities) have higher credit risk.

What are the disadvantages of credit risk funds?

Credit risk funds are a high-risk investment option. They are vulnerable to credit risk, interest rate risk, default risk and liquidity risk. They are also a relatively less diverse investment option. Lastly, credit risk funds are a long-term investment and may not be suitable for investors seeking short-term and liquid investments.

Can I invest in credit risk funds for the short term?

Credit risk funds are a medium to long-term investment option. It is recommended to remain invested in these funds for at least three years.

What is an AA-rated bond?

Bonds are rated on the basis of their credit-quality and the financial strength of the issuing company. The highest rated bonds are labelled as AAA. AA bonds have a relatively lower credit-quality.

How are credit risk mutual funds taxed?

Credit risk mutual funds are primarily a debt fund and are taxed accordingly. Short Term Capital Gains tax is levied on units held for less than three years. The amount is added to the income of the investor and taxed according to their income tax slab. Long Term Capital Gains Tax is levied on units held for more than three years at 20%.

 

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.