debt funds generate superior returns for investors who do not fear volatility and dont seek the safety of fixed deposits in a market related product mahendra jajoo head fixed income mirae asset global investments tells et wealth how would you assess the credit profile of india inc are more credit events likely indias gdp growth has been slowing down over the past few quarters this slowdown has in part been triggered by global developments on the domestic front the credit squeeze following the unexpected default by ilfs and the more recent defaults have led to difficulties in raising fresh resources nbfcs have been among the main growth drivers for the economy in the past decade and difficulties in this segment have percolated to other segments resulting in demand contraction the corporate sector is focused on normalising past overleveraging and over capacity with rollover funding becoming a challenge the credit situation has become very difficult while mutual funds have had some troubling times the industry sailed through the phase with minimal casualties while we believe that the worst is over on the credit front there could still be some after effects nevertheless no specific major event that could hit the industry adversely is apparent as the investors and fund managers have become cautioushow are you looking at nbfc credit in light of the recent problems are you being more selective it is only natural to be extremely cautious and stay away from anything that has the slightest possibility of causing trouble our core approach has always been to shun aggressive credit positioning this helped us avoid any major setbacks in the current round we remain very selective in defining our universe strongly risk averse lenders are reluctant to offer fresh funding to nbfcs barring a few top namesseveral debt mfs have witnessed huge redemptions in recent months what problems does this pose for the fund manager overall aum data of flows into debt mutual funds does not support that perception on a net basis and after adjusting for cyclical factors fixed income aum may actually be higher this month compared to the same time last year however some categories like credit risk funds and corporate bond funds would have witnessed net outflowsimmediately after the september event there were some panic redemptions and debt aum went down the same debt funds saw a decrease of over 5 which is fairly manageable debt funds have seen several rounds of severe volatility over time and successfully met the challenge however each such episode does leave its own destructive trailwill recently introduced norms restore faith of investors in debt funds the recent changes seem to be quite comprehensive and will address some of the longdebated issues these changes should significantly help improve risk management liquidity and transparency in debt mutual fund portfolios while the faith has already been restored the proposed changes will further strengthen itdoes it not make sense to have credit quality limits on debt funds like duration limits credit is a function