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How safe are perpetual bonds?

There is no major reward to commensurate with the risk that one assumes by investing in such bonds, says Dhirendra Kumar

Can you give us some information about the safety and returns of perpetual bonds?
- Badri Ramamurthy

Perpetual bonds, a few months back, gave us a nasty surprise when some debt mutual funds, which had invested in these bonds issued by Yes Bank, took a hit. In fact, these bonds have been one of the biggest culprits in terms of hurting debt funds. Everybody thought that these bonds were a subordinated debt of a bank and how something fundamental to a bank could go wrong. But it did, with the Yes bank crisis being the worst surprise.

In my opinion, why take a chance with your small money? We have plenty of alternatives and I think one should just keep away from anything exotic, more so in the case of fixed income. This is simply because you don't have any reward to commensurate with the risk that you are assuming by investing in such bonds. You should not get greedy with your fixed-income investments. I would say, when it comes to fixed income, you should look at it more as an alternative that provides stability to your portfolio.