Most large funds have little exposure to risky bonds

The IL&FS crisis and subsequent defaults which rattled the bond market gave an idea about the extent of mutual funds’ exposure to risky bond assets. Keeping this in mind, it is important to understand how fund houses stand in terms of their exposure to relatively risky bond assets — bond schemes which come under the below AA rating category.

As per Morningstar India data, in the short duration bond category, Franklin Templeton, BOI AXA, Indiabulls, Edelweiss and Aditya Birla Sun Life are the top five fund houses (in that order) with exposure in the range of 9% to 48.99%. Short duration bond funds invest in bonds which mature between the duration of one and three years.

Among the low duration and ultra-short duration schemes, Franklin, Edelweiss, BOI AXA, IDBI and Reliance are the top five fund houses (in that order) which have exposure in the range of 7.1%- 44.1%. Low duration bond schemes invest in instruments which mature between six months and one year; and ultra-short low duration schemes invest in instruments which mature between three and six months. It must be noted that short-term bond funds are often positioned as a substitute for bank savings account or fixed deposits. Hence, they are not expected to compromise on the safety aspect.