Synopsis: Credit risk mutual funds invest in lower-rated corporate bonds to generate higher returns than traditional debt funds. This article lists the top five credit risk mutual funds ranked by their 3-year CAGR.
Credit Risk Mutual Funds represent a type of debt mutual funds wherein the fund is required to hold a minimum of 65% of its assets in corporate bonds with ratings AA or below (not including AA+ and above rated bonds). These bonds pay higher interest rates which increase the possibility of gaining higher returns. At the same time, there is more chance of credit rating downgrade and default, making them suitable for investors with a higher risk appetite
Top 5 Credit Risk Mutual Funds
1. DSP Credit Risk Fund
- NAV: ₹60.35
- AUM: ₹275.31 Cr
- Expense Ratio: 0.46%
- Exit Load: 3% (within 12 months)
- Performance Snapshot
- 3-Year CAGR: 16.8%
- 3-Year Absolute Return: 59.7%
- Category Comparison (3-Year)
- Fund 3-Year CAGR: 16.8%
- Debt Credit risk Category Average: 8.7%
- Outperformance: +8.1 percentage points
2. Aditya Birla Sun Life Credit Risk Fund
- NAV: ₹27.85
- AUM: ₹1,461.39 Cr
- Expense Ratio: 0.79%
- Exit Load: 1% (within 1 year)
- Performance Snapshot
- 3-Year CAGR: 13.1%
- 3-Year Absolute Return: 44.8%
- Category Comparison (3-Year)
- Fund 3-Year CAGR: 13.1%
- Debt Credit risk Category Average: 8.7%
- Outperformance: +4.4 percentage points
3. HSBC Credit Risk Fund
- NAV: ₹37.42
- AUM: ₹470.01 Cr
- Expense Ratio: 0.97%
- Exit Load: 1% (within 1 year)
- Performance Snapshot
- 3-Year CAGR: 11.8%
- 3-Year Absolute Return: 39.8%
- Category Comparison (3-Year)
- Fund 3-Year CAGR: 11.8%
- Debt Credit risk Category Average: 8.7%
- Outperformance: +3.1 percentage points
Also read: Top 5 Thematic-Quant Mutual Funds Based on 3-Year Returns – Do You Own Any?
4. Bank of India Credit Risk Fund
- NAV: ₹14.73
- AUM: ₹86.74 Cr
- Expense Ratio: 0.63%
- Exit Load: 1% (within 1 year)
- Performance Snapshot
- 3-Year CAGR: 10.0%
- 3-Year Absolute Return: 33.2%
- Category Comparison (3-Year)
- Fund 3-Year CAGR: 10.0%
- Debt Credit risk Category Average: 8.7%
- Outperformance: +1.3 percentage points
5. Invesco India Credit Risk Fund
- NAV: ₹2,333.87
- AUM: ₹163.40 Cr
- Expense Ratio: 0.28%
- Exit Load: 1% (within 3 months)
- Performance Snapshot
- 3-Year CAGR: 9.6%
- 3-Year Absolute Return: 32.0%
- Category Comparison (3-Year)
- Fund 3-Year CAGR: 9.6%
- Debt Credit risk Category Average: 8.7%
- Outperformance: +0.9 percentage points
Note: NAV, AUM, expense ratio and exit load data are sourced from Groww. Data is as of 23rd July 2026.
Things to Consider Before Investing
- Check the credit quality of the fund’s portfolio.
- Invest only if you have a 3-year or longer investment horizon.
- Don’t choose a fund based only on past returns.
- Ensure the fund matches your risk appetite.
Key Takeaways
- DSP Credit Risk Fund topped the list with a 16.8% 3-year CAGR, well above the 8.7% category average.
- All five funds outperformed the credit risk fund category average over the last three years.
- Aditya Birla Sun Life Credit Risk Fund has the largest AUM (₹1,461.39 crore) among the top five.
- Credit risk funds offer higher return potential but also carry higher credit and default risks.
- Past performance doesn’t guarantee future returns. Always assess the fund’s risk before investing.
Who Should Invest?
Credit risk mutual funds are well-suited for investors having a medium to high-risk profile, and who are ready to assume greater credit risk in order to gain better returns on their investments. It is ideally suited for investors having an investment period of 3 years or more, and not for those looking for stable debt investments.
Disclaimer: The information provided in this article is for educational purposes only and should not be construed as financial advice or investment recommendation. Returns mentioned are based on historical performance and may not be sustained in the future. Mutual fund investments are subject to market risks, including potential loss of capital. Investors are advised to assess their risk appetite and financial goals and to consult a certified financial advisor before investing.
