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.
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What is the Meaning of a Credit Risk Fund?
Credit Risk Funds can be compared to lending money to someone with a less stable financial history—you may earn better returns, but the risk of default is also higher. These funds invest in lower-rated debt securities, offering the potential for better returns but with an increased level of risk. They are suited for investors willing to accept uncertainty in exchange for potentially better income.
Credit risk funds are debt mutual funds that invest in lower-rated debt securities, typically rated AA or below. The credit quality of these securities reflects the financial strength of the issuing company, and the higher risk associated with these bonds earns the name "credit risk funds."
These funds carry a higher level of credit risk and are considered high-risk, potentially high-return investments. While they may offer better returns compared to low-risk debt funds, they are also less liquid, which adds to their risk profile.
Credit risk funds must invest at least 65% of their assets in corporate bonds rated AA or lower, with the remainder allocated to other debt securities. Since they do not invest in equities, their growth potential is limited.
These funds are less diversified, primarily investing in bonds and debt securities. This concentration in low-rated debt increases the overall risk. Credit risk funds are vulnerable to default risk, and the credit ratings of the underlying securities may change over time. Investors must fully understand these risks before investing.
As credit risk funds are taxed like other debt funds, STCG applies to investments held for less than three years, based on the investor's income tax slab, while LTCG is taxed at 20% on holdings over three years.
- Min Investment 1,000
- Min SIP Amount 100
- Exit Load1%
1% if redeemed / switched out within 365 days from the date of allotment
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
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Performance as on 29th November 2024
| Scheme Names | CAGR Returns (%) | Current value of Investment of 10,000 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 1 year | 3 year | 5 year | 10 year | 03/03/2017 Since inception | 1 year | 3 year | 5 year | 10 year | 03/03/2017 Since inception | |
| Bandhan Credit Risk Fund - Regular Plan - Growth | 7.44 | 5.24 | 5.48 | N.A. | 6.01 | 10,746 | 11,659 | 13,062 | N.A. | 15,715 |
| 7.96 | 7.49 | 7.94 | N.A. | 8.01 | 10,796 | 12,419 | 14,661 | N.A. | 18,164 | |
| 7.39 | 6.86 | 7.90 | N.A. | 7.34 | 10,739 | 12,202 | 14,630 | N.A. | 17,310 | |
| 10.18 | 5.58 | 5.48 | 6.79 | 5.73 | 11,021 | 11,769 | 13,059 | 19,309 | 15,396 | |
| ^ 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/46xQzi1
Bandhan Credit Risk Fund
(Scheme Risk-o-meter)
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 suited for investors with a high-risk appetite who are comfortable with exposure to liquidity, default, interest rate, and credit risk. These funds are ideal for investors seeking high-risk, high-return opportunities over a long-term horizon.
Credit risk mutual funds are not suitable for investors seeking portfolio diversification, as they focus mainly on low-rated corporate debt securities. These funds may appeal to investors in higher tax brackets (e.g., 30%) since LTCG is taxed at 20% after three years, potentially offering tax efficiency.
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%.