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Rating of Mutual Funds To invest in the debt oriented mutual funds, investors use various criteria to find the

best performing funds. Since capital security is paramount for many investors, rating agencies assign credit rating to fixed income mutual funds. These ratings are an attempt to provide simple-to-use measures of credit risk assessment. The ratings provide an investor with an opinion on the overall credit quality of specific debt Mutual Fund scheme. Investors shouldn’t confuse ‘ratings’ with ‘rankings’. The latter, a mutual fund ranking is usually a measure of a fund's historical risk-adjusted performance over different time frames compared with the funds in the same category. It is thus a composite measure of both return and risk, and is not an opinion, but only an assessment of past returns, which may or may not be replicated in future. Rankings are available for funds of all types of asset class, but ratings are assigned to debt portfolios. The Credit Risk Ratings incorporate an assessment of a debt fund’s published investment objectives and policies, its management characteristics, and the creditworthiness of its investment portfolio. Thus it arms investors with an independent and reliable opinion on the relative credit quality of the portfolio and enables them to take informed investment decisions. There are several companies that assess mutual funds and assign them ratings based on specific criteria and this criterion varies according to the type and nature of the debt funds. Usually companies use prospectus and related documents, the debt fund portfolio data including periodic investor reports and public filings, Industry surveys, studies, special reports and the internal documents describing the AMC’s structure, investment philosophy, decision making process and performance track record. Credit Rating assigned to the funds ranges from the ‘mfAAA’ to ‘mfC’, which is broadly classified into two categories: (i) Secure - which indicates the safety of the fund against credit defaults and (ii) Vulnerable – which indicates the vulnerability to losses from credit defaults. Mutual funds credit ratings scale for long term debt funds and short term debt funds with definitions are given below:-

is one notch lower than mfAAA. . the rating of mfA2+ is one notch higher than mfA2. Thus. and the credit rating offers a ready to use guide in assessing one of the criterion i. Investors should review a fund thoroughly before investing in it.e. While. the sign of + (plus) may be appended to the rating symbols to indicate their relatively stronger position within the rating categories concerned. the rating of mfAAA+ is one notch higher than mfAAA. while mfAAA. for short term debt funds this scales applies to the funds with weighted average maturity up to one year and such funds generally include liquid funds. the risk of default in a portfolio.Long term debt funds credit risk rating scale usually applies to the debt funds having weighted average maturity above one year. For the long term rating categories the sign of + (plus) or – (minus) may be appended to the rating symbols to indicate their relative position within the rating categories concerned. Thus. For the short-term fund ratings of mfA1 through to mfA4.