Is it true that credit risk funds are now again attracting interest?

I would not say that the credit funds are back in demand but they sentiments are not as bad or as negative as they were year over the previous two years. In fact, post the negative press in 2019 and 2020, credit risk funds are actually back in the reckoning all over again. If you look at year 2021 overall, credit risk funds saw inflows of Rs.917 crore in stark contrast to net outflows of Rs.35,710 crore in 2020.

Years 2019 and 2020 were very bad for the credit risk funds. In fact, year 2020 was specifically tumultuous for credit risk funds with a spate of downgrades and defaults amidst the COVID pressure. The last straw was the controversial decision by Franklin Templeton Mutual Fund to suspend sale and redemption of 6 of its debt funds, locking in Rs.25,000 crore, making people risk averse. However, credit funds yielded a robust 9.4% in year 2021.