Secured lending doesn't reduce risk in debt funds

Investors need to look at the portfolio before investing

It’s isn’t easy being a debt fund manager when credit ratings of companies are being downgraded on a regular basis. The problem is dual, say fund managers – investors seek high returns from debt funds but are unwilling to take risk. “If I take riskier papers to shore up returns, the investor should realise there are chances that things may go wrong,” says a debt fund manager who did not wish to be named. 

However, given the number of downgrades, fund managers have been forced to seek collateral or adding covenants. “In the current credit environment, where we are witnessing bad