Debt AIFs: Does the return commensurate with the risks?
Live MintThere was a time when credit risk funds within debt mutual funds used to be widely invested to get the additional return kicker over traditional debt assets. Kind of debt AIFs Credit investments as such are very wide in nature – they can either be ‘A’ rated or below or equivalent to investment grade i.e. So, debt AIFs returns range from a minimum of 9-10% to as high as 18-20% depending on the level of structuring or credit risks the fund is entering into. Tax efficiency Unlike debt MF where there are no taxation at the fund manager level and the debt indexation kicks in after three years, credit AIFs are taxed marginally or it depends upon how the fund manager structures the end investments. Also, unlike debt MFs where all income is considered the same, the taxation depends upon what kind of returns the fund manager generates – if it is in the form of coupons or interest, it is fully taxable or if it is in form of capital gains, it is taxed accordingly if it is listed or unlisted.
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