The Hindu : Business : Mutual funds invest more in corporate bonds

Online edition of India's National Newspaper
Tuesday, Oct 26, 2004

Business

Business

Mutual funds invest more in corporate bonds

By Our Corporate Reporter

CHENNAI, OCT. 25. Mutual funds have increased their exposure to corporate bonds while their investments in Government securities have fallen, according to a study by CRISIL FundServices.

The agency has stated that mutual funds had invested 65 per cent of their debt portfolios in corporate debt as on August end up from 44 per cent a year ago.

Even within corporate bonds, mutual funds had penetrated down the credit spectrum with the proportion of investments in bonds rated in the `AA' category and below almost doubling in this period for long term debt funds.

The attractive spreads of corporate bonds over government securities and the reduced risk perception of these bonds, given the issuers' strong fundamentals were cited as reasons for corporate bonds to have become increasingly active.

Longer duration of government securities, which expose mutual funds to relatively higher valuation losses in a rising interest rate scenario also enabled mutual funds to turn their attention to corporate bonds, according to CRISIL FundServices.

In the two years up to September 2003, the downward trend in interest rates had resulted in debt oriented funds concentrating on Government securities to reap the concomitant valuation benefits.

Printer friendly page
Send this article to Friends by E-Mail

Business

News Update

Stories in this Section