Rich Asia Investors Face Rising Risk in Leveraged Bond Funds
- Default risk could rise ‘exponentially’ if market turns: Soon
- Investors may face margin calls if market turns: Banerjee
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The red hot rally in credit this year has prompted wealthy investors in Asia to borrow money to buy funds that often load up on lower-rated bonds.
That’s setting the stage for pain should the market turn, as the products pose troubling risks if that happens, some observers say. Some of these so-called fixed-maturity funds put most of their eggs in one basket, such as in Chinese property debt. The risks are compounded by leverage, and by the fact that the notes in the funds tend to mature around the same time.