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• Landscapes in fixed income doesn’t change overnight, credit spreads thus still remain high despite action from regulators and GOI as these will fructify over a period of time so there might be opportunities in credit markets now, but due diligence has to be stronger so that the opportunity doesn’t become a bigger threat. Look at liquidity of papers, and invest in papers issued by companies that have been there for a while.

• The credit risk which was unsystematic in nature, is becoming a more of a systematic risk as COVID presents a precarious situation. However, over the last few years despite many credit event, the median returns of credit category of debt mutual funds is around 5% over longer time which was around 9% range if seen before IL & FS crises ( till June 2018 ).
• There will be certain times where certain asset classes will lead depending upon the economic cycles and thus asset allocation plays very important role. Greater due diligence is always required at the end of an advisor, so that clients’ risk appetite matches the risk attributes of the fund and right asset allocation an overall portfolio level.

• Current allocation for debt Investor could be bulk of the portfolio towards low duration higher quality papers like – PSU, GOI and for alpha, from higher risk portfolios like credit funds as spreads are decent now could be taken as a cherry on the return. So, tail end can be allocated to credit risk.

• ETF and Active fund could have same universe. ETF shouldn’t be compared with credit risk funds. ETF can be compared with PSU, corporate funds. ETF is a good option for people who want to make money commensurate to the economic cycle and are okay to forego any alpha.

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