Credit opportunity funds bet on high-risk bonds to offer better returns

Examine whether you have the appetite for these funds before investing; the high-yielding bonds they buy into are issued by firms whose credit quality is low

Among all debt funds, credit opportunity funds stand out at present. They have outperformed all other fund categories in the last five years. One-year average returns of these funds are at 7.5 per cent, three-year at 9 per cent and five-year at 9.4 per cent. The returns look all the more attractive when yields on bonds are volatile, hitting returns from other debt funds. 

But before you rush to invest in these funds, understand the risks they carry and whether you have the appetite for them. Higher returns in an investment product come from taking higher risks. In the case