High Net Worth Individuals Go For Low-Rated Debt Mutual Funds Debt mutual funds with low-rated holdings are becoming popular among high net worth investors. Credit risk funds have started to witness inflows owing to the increase in interest rates of the product and improvement in the credit ratings of mutual fund companies. Investors can expect the total gross return of 9.2-11.4 percent from Credit risk funds in case of holding it till maturity. This is in fact much better than the bank fixed deposits which give a return of 7% before taxes. The yield to maturity (YTM) of BOI AXA Credit Risk Fund, Franklin India Credit Risk Fund, and Aditya Birla Sunlife Credit Risk Fund has increased to 11.42 percent, 10.84 percent, and 10.73 percent, respectively. RBI increased the repo rates by 25 basis points subject to the latest increase in interest rates. This boosted the bond yields, which in turn improved the yield to maturity (YTM) of credit risk fund plans. Vishal Dhawan, Chief Financial Planner of Plan Ahead Wealth Advisors, believes that the investors must understand that the Credit risk funds come with extra risk even though they can earn an extra 1-1.5 percent in this category of Debt mutual funds when compared to AAA-rated papers. Rupesh Bhansali, Head (Distribution), GEPL Capital, feels that the investors who are ready to face higher level of risks and those investors who can continue the fund for three years could consider investing their hard earned money in credit risk funds. “During the last year, corporates have reduced debt and derisked their balance sheets. The business cycle has turned and there is an uptick in revenues and improved outlook for cyclical business,” said Mr. Nitish Sikand, the Fund Manager (Fixed Income) of Invesco Mutual Fund. Financial advisors suggested that the mutual fund “investors could earn 9-10 percent annual returns” from low-cost Debt mutual funds, according to The Economic Times. Credit risk funds, previously known as credit opportunities, invest major portion (at least 65 percent) of its corpus in AA rated or low-rated securities rather than investing in corporate bond funds. Must Read recommended by The post High Net Worth Individuals Go For Low-Rated Debt Mutual Funds appeared first on OWLT Market.