Know Your Debt Fund: How are corporate bond funds different from credit risk funds?

Corporate bond funds is a Rs 86,000 crore category and on an industry level has grown over 50 percent in the last 13 months (as of May 4, 2020).

So, while credit risk funds invest minimum 65 percent in AA and below paper, the corporate bond category has a mandate to invest minimum 80 percent in AA+ and above instruments. One can say both categories are on diametrically opposite sides of investing into the credit category. Investor profile in the corporate bond fund is predominantly institutional but they do offer advantages for retail investors too.

Prableen Bajpai of FinFix Research says corporate bond funds offer many positives like liquidity, transparency, tax efficiency and decent risk adjusted returns.