23 Oct Fund Talk – 1
Do you know the difference between a “credit risk” fund and “dynamic bond” fund?
“Credit Risk” fund earlier called “Credit Opportunities” fund will have at least 65% of its investment in instruments rated AA or lower.
(Note the word “at least” because it means the fund can have even a higher percentage than 65% in instruments of AA or lower).
Hence this fund is exposed to higher risk instruments as compared to the Dynamic Bond Fund which on the other hand will invest at least 80% in instruments rated AAA or equivalent.
Thus Dynamic Bond Fund focuses a lot more on “safety” as compared to “Credit Risk” fund.
As far as the “Credit Risk” Fund goes, quite rightly its name has been changed from”Credit Opportunities” to “Credit Risk”.
While a lot of us believe that debt funds are safer than equity funds, I have a contra view because the “market” can temporarily hurt the NAV in an equity fund whereas credit default can make a permanent damage to the NAV of a debt fund.