Higher returns in credit funds come with higher risks

Investing in such funds requires more research from the investor. Always look at the quality of the portfolio before investing

Credit opportunity funds have given investors an average return of 9.39 per cent over the past year (source: Value Research), which makes them the best-performing debt fund category over this time horizon currently. This is a very attractive rate of return in the current falling interest-rate scenario. But before you rush to invest in these funds, understand the risks they carry and whether you have the appetite for them.

Returns from credit opportunity funds have been high because they invest in bonds having higher yields but lower credit quality (and hence higher risk). Moreover, inflows into credit opportunity funds have