The euphoric surge in assets under management (AUM) of fixed-income funds in recent years may be a reason to rejoice for the industry, but it also heightens the risks for investors.
As of July 2017, the AUM of fixed-income funds stood at Rs10,59,582 crore, compared with Rs524,009 crore in July 2014, and Rs311,900 crore in July 2012—a near-tripling in just 5 years. The run-up mirrors the growth in bond market where the number of issuers has quadrupled from 164 in fiscal 2012 to 671 in fiscal 2017, while the value of these issuances has grown at a compound annual growth rate (CAGR) of about 23% from Rs251,437 crore to Rs706,955 crore. The bulk of the issuances are of papers rated AAA, denoting highest safety and liquidity.
So where is the risk?
