Rajnish Optimist 145 Questions 255 Answers 237 Best Answers 1k Points View Profile Rajnish Asked: September 28, 20202020-09-28T07:27:38+05:30 2020-09-28T07:27:38+05:30In: UPSC PRELIMS What is Credit Risk Fund? Short notes on Credit Risk Fund. crfeconomicseconomy Share Facebook 1 Answer Recent Rajveer Thakur With Love 8 Questions 6 Answers 6 Best Answers 49 Points View Profile Best Answer rajveer With Love 2020-09-28T07:42:38+05:30Added an answer on September 28, 2020 at 7:42 am About Credit Risk Fund: The ninth largest in the nation, Franklin Templeton Mutual Fund, has planned to liquidate six yield-oriented controlled credit funds, one of which is a credit risk fund. Credit risk funds are debt funds which play on the high-risk-high-reward principle. Although corporations’ higher-rated bonds are better and pay lower interest rates, credit risk funds typically invest in lower-rated bonds that deliver greater returns but often bear a higher risk. Credit funds spend 65% of the portfolio of AA-rated or below-rated bonds, and investors must be mindful that they are engaging of lower-rated paper schemes. While these funds are mostly of short-term, they are also one of the most riskiest in the group. By adopting a higher diversification policy, portfolio managers lowers their risk. They do so by seeing if the plan is greatly diversified on the equity side, so the whole portfolio is not affected even if there is a loss of one or two firms. Also if the structure on the liabilities side is well diversified, then even if one or two buyers want salvation, it does not force the house of the fund to sell. 1 Reply Share Share Share on Facebook Share on Twitter Share on WhatsApp Leave an answerCancel replyYou must login or register to add a new answer. Related Questions Tell us about the Global Gender Gap Report 2021. Tell us about the Global Hunger Index 2020.