Credit Risk Funds
Last Updated on 11 May 2026
3 Year Average Returns
8.73%
Funds on Anand Rathi
47
Credit Risk Funds to Invest in 2026
| Fund Name | |||
|---|---|---|---|
| Bank of India Credit Risk Fund - Regular | 16.95% | 9.56% | 27.51% |
| DSP Credit Risk Fund (G) | 9.82% | 15.58% | 12.00% |
| DSP Credit Risk Fund (IDCW-D) | 9.85% | 15.59% | 11.93% |
| DSP Credit Risk Fund (IDCW-Q) | 9.82% | 15.14% | 11.74% |
| DSP Credit Risk Fund (IDCW) | 9.82% | 13.74% | 10.92% |
| UTI-Credit Risk Fund (IDCW-A) | 5.98% | 7.82% | 9.85% |
| Aditya Birla SL Credit Risk Fund (G) | 12.15% | 11.84% | 9.77% |
| Aditya Birla SL Credit Risk Fund (IDCW) | 12.49% | 11.82% | 9.76% |
| UTI-Credit Risk Fund (IDCW-H) | 5.98% | 6.96% | 9.33% |
| UTI-Credit Risk Fund (G) | 5.98% | 6.96% | 9.33% |
| UTI-Credit Risk Fund (IDCW-Q) | 5.98% | 6.96% | 9.33% |
| UTI-Credit Risk Fund (IDCW-M) | 5.98% | 6.96% | 9.33% |
| UTI-Credit Risk Fund (Flexi) | 5.98% | 6.96% | 9.32% |
| DSP Credit Risk Fund (IDCW-M) | 8.85% | 13.24% | 9.29% |
| DSP Credit Risk Fund (IDCW-W) | 9.67% | 13.26% | 9.17% |
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What Are Credit Risk Fund?
A credit risk fund is an open-ended debt fund that invests at least 65% in corporate bonds with slightly lower credit ratings. These funds take calculated risks by lending money to businesses instead of the government or top-rated companies.
The sole purpose of a credit risk mutual fund is to invest in companies that pay higher interest because the risk is higher. And that higher interest is what makes credit risk mutual funds attractive to investors looking for better returns than normal debt funds.
Here, not all companies default, of course. Many issuers repay on time. But since there is a chance of delay or trouble, investors may be rewarded with a higher yield.
Benefits Of Credit Risk Fund
Credit risk debt funds offer a different set of benefits compared to traditional debt mutual funds, mainly by taking exposure to corporate bonds with higher interest potential. Here are the key practical advantages:
Yield Opportunity
Credit risk funds invest in lower-rated corporate bonds that pay higher interest than top-rated bonds or government securities. If companies repay on time, investors have an opportunity to offer better than other debt funds.
Boost from Credit Improvement
In some cases, when a company's financial position improves, its bond rating can be upgraded. This leads to bond price appreciation, which can add extra income to the fund apart from interest payments.
Diversified Exposure
Instead of lending to just one or two companies, credit risk mutual funds spread money across multiple issuers and sectors. This reduces the overall portfolio impact if one company faces trouble.
Active Risk Monitoring
Fund managers continuously track company performance, cash flows, and industry conditions. If risk increases, they may reduce exposure early to protect investor capital.
How Do Credit Risk Funds Work?
As per the SEBI (Securities and Exchange Board of India) norms, credit risk mutual funds must invest at least 65% of their assets in corporate bonds. However, the allocation flexibility remains with the fund manager.
Let's see how credit risk mutual funds actually work in real life:
1. Analyzing Companies & Fundamentals
The fund manager studies different businesses (their cash flows, debt levels, financial health, and future outlook).
2. Selection of Corporate Bonds
Based on this research, the fund invests in corporate bonds that typically carry lower credit ratings but offer higher yields.
3. Investment plus Diversification
Instead of lending (or investing) to one company, the fund invests in multiple companies to reduce the overall risk of the portfolio.
4. NAV Moves Based on Credit Health
If a company faces trouble or delays payment, the bond value drops — and so does the fund's NAV.
5. Actively Managed Risk
Fund managers continuously monitor company performance and may exit risky bonds early to limit losses.
Who Should Invest In Credit Risk Funds?
Credit risk funds can be suitable for those who;
- Desire better yield than other debt investments
- Aggressive investors or those individuals who can handle market ups and downs.
- Have medium to long-term horizon (3–5 years)
- Better understanding of risk-reward balance.
How To Invest In Credit Risk Funds With Anand Rathi?
If you're thinking about investing in credit risk mutual funds, Anand Rathi makes the process simple and fully online.
Here's how to invest in a credit risk fund with us in 5 easy steps:
Sign Up or Log In
Head to the Anand Rathi website or open the AR Invest app and log in to your demat account securely.
Complete Your KYC Once
Finish the one-time digital KYC process — quick, paperless, and hassle-free.
Explore Credit Risk Funds
Go through different credit risk debt fund options, compare portfolios, maturity profiles, and risk exposure.
Pick a Suitable Fund
Choose a credit risk fund that matches your investment goals and aligns with your risk levels.
Invest Your Way
Start with SIP investment or go for a lumpsum investment as per your choice.
Track Anytime
Monitor NAV, holdings, and portfolio performance directly – anytime, anywhere, straight from the dashboard.
Factors To Consider Before Investing In Credit Risk Funds
Before investing in any credit risk debt fund, there are a few important things every investor should actually look into, not just past returns.
Concentration Level
Check how much of the credit risk fund's money is invested in its top holdings. If a large portion is parked in just a few companies, the risk becomes much higher if even one issuer faces trouble.
Portfolio Holdings Quality
Go through the list of companies and bonds the fund holds. A healthier mix across sectors and issuers usually indicates better risk management.
Over-Concentration Risk
Some credit risk mutual funds take heavy exposure to specific sectors or lower-rated companies to chase higher returns. This can boost returns in good times but cause sharp falls during stress. Evaluate the credit risk in mutual funds and how exposed they are.
Average Maturity Period
Funds with longer duration, along with lower credit-rated bonds, carry double risk (interest rate risk plus credit risk). Check the credit risk fund's duration to evaluate the NAV sensitivity to market movements.
Fund Manager's Track Record & Performance During Stress Periods
Look at how experienced the fund manager is in handling credit cycles. Check how the fund behaved during market crashes or corporate default phases. A good fund manager tries to limit damage and recover faster.
Taxation Rules On Credit Risk Funds
Like other debt funds, credit risk mutual funds are taxed based on their date of purchase. For instance:
Bought Before April 1, 2023, but:
Sold after July 23, 2024 - LTCG (12.5% - without indexation), STCG (slab rate).
Bought On or after April 1, 2023:
Irrespective of holding period - Taxed at the individual's slab rate under STCG.
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