Why is Nippon Fund again buying high risk bonds in its debt funds?

In a sense, the Nippon Mutual Fund has turned more bullish on lower-rated bonds of riskier companies due to the favourable impact of the ongoing economic recovery. In the midst of the pandemic many of the lower rated companies not only survived but also thrived and improved their operational and financial metrics. That has given Nippon more confidence to take the lower rating debt approach.

The concerns over lower rate debt are still quite high after the spate of defaults in 2018 and 2019 as well as the Templeton fiasco in 2020. Nippon currently oversees $15 billion of debt assets and hopes to move down the rating table to move up the yield tables. Nippon Fund sees a lot of opportunities in quality non-AAA papers. One signal is that the ratio of credit rating upgrades to downgrades touched a 10-year high of 3:1, an extremely positive sign.