Credit risks funds may not be the flavour of the season but some fund houses have started promoting these funds by offering attractive trail commission to distributors.
An analysis of commission structure of a large bank shows that at least five fund houses have been offering trail commission in the range of 90 bps and 1.20% to distributors in credit risk funds. Surprisingly, these credit funds have been in the news recently.
A senior MF official requesting anonymity said that his fund house has increase trail commission in credit risk fund to increase inflows in the funds, which was affected due to recent series of credit events.
Another reason was decline in AUM of these schemes which led fund houses to restructure TER, he added.
Debt guru Joydeep Sen believes that many fund houses have started promoting credit risk funds as they feel it is good time to invest in credit risk funds. However, distributors should be watchful of the fund’s exposure to various instruments depending on their credit ratings like AAA, AA and A. While credit quality was always relevant, it has become more important in the recent times thanks to the series of defaults over last one year and ‘recency bias’ of investors, he added.
