Don’t Abandon Debt Mutual Funds, They are Important
23-Jun-2020
Debt mutual funds was safe - or everybody thought so until the IL&FS episode. Suddenly, debt funds started gaining notoriety as downgrades or defaults hit them with regularity in a slowing economy, before falling into the clutches of the COVID-19 pandemic and subsequent lockdown. Cracks have been appearing in debt funds since the IL&FS episode in 2018, translating into risk aversion in sectors like NBFCs, realty and structured products.
Credit funds were hit the hardest. Some other categories which were heavy on low-rated credit or structured assets were also hit. The cracks widened as the COVID-19 pandemic hit teh capital markets, leading to worries on credit default as well fund liquidity. Closure of some debt schemes by a large fund house added to the woes of investors trying to come to terms with credit losses in past few years.
Source : Economic Times