What is Potential Risk Class Matrix of debt mutual funds?

1) PRC matrix is a 3 X 3 matrix used for classifying the risk of debt mutual funds.
2) PRC matrix will take into account both interest rate risk and credit risk.
3) Interest rate risk is measured using the Macaulay Duration and there are 3 classes with Class I being the lowest risk, Class II with moderate risk and Class III with the highest interest rate risk.
4) Credit risk is measure using the weighted credit risk value of each instrument according to credit rating and is classified into 3 buckets, namely Class A which is lowest risk, Class B is moderate risk and Class C which is high credit risk.
5) Once a scheme is placed in a particular cell, a change would mean a change in fundamental attributes giving existing investors the chance to exit without paying exit load.


Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.