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Why Accrual Funds ?<br />
Default Risk - Very Low<br />
- CRISIL’s average 1 year transition rates for long term ratings between 2007 and 2017<br />
Ratings AAA AA A BBB BB B C D<br />
AAA 97.78% 2.22% 0% 0% 0% 0% 0% 0%<br />
AA 1.19% 95.27% 3.04% 0.47% 0.16% 0.03% 0.02% 0.02%<br />
A 0.02 2.75% 91.70% 4.97% 0.27% 0.03% 0.05% 0.22%<br />
• The probability of default of AAA rated firms are<br />
very low<br />
• AAA continue to hold its rating 97.78% of times,<br />
• AA around 95.27% of times,<br />
• A holds the rating around 91.70% of times<br />
Our Comments<br />
• Kotak AMC does not invest below A* category rating. Our robust<br />
monitoring ensures that we do not take exposure even in AA & A<br />
ratings from sensitive sectors<br />
• Moreover, to protect our interests , we ensure guarantee /<br />
mortgage / collateral etc. where required<br />
• We look to invest in assets that have wide market acceptance<br />
• This ensures that:<br />
1. Our credit risk is lower than perceived<br />
2. That we capture value with limited risk<br />
*Unrated papers that we invest in is generally very low and has implied credit risk which is moderate to low<br />
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