When investing in debt securities, interest rates are a crucial factor in decision-making. An investor needs to carefully assess the interest rate environment while picking the ideal investment option. A floater mutual fund is a debt mutual fund that invests in debt securities with varying interest rates that fluctuate with market conditions.
A floater mutual fund is one that invests at least 65% of its portfolio in floating-rate debt instruments. Unlike fixed-rate debt instruments, floating-rate instruments have variable interest rates.
The interest rate of floating-rate instruments is linked to market conditions or a benchmark index and is influenced by the current interest rate environment. A floater mutual fund also invests in fixed-income securities that are modified to perform similarly to floating rate instruments. This allows floating mutual funds to adjust their portfolios and benefit from different business cycles and rising interest rates.
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| Fund Name | Category | Risk | NAV | Expense Ratio | 1Y Returns | 3Y Returns | 5Y Returns | 7Y Returns | 10Y Returns | Rating | Fund Size (in Cr) | Exit Load |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
HDFC Floating Interest Rates Fund | Debt | Moderate | 54.89 | 0.27 | 6.2% | 7.6% | 6.8% | 7.1% | 7.3% | 4 | ₹16,133 | - |
ICICI Prudential Floating Interest Rates Fund | Debt | Low to Moderate | 502.30 | 0.29 | 6.9% | 7.9% | 7.1% | 7.5% | 7.7% | 4 | ₹9,118 | - |
SBI Floating Interest Rates Fund | Debt | Moderate | 14.49 | 0.28 | 6.5% | 7.6% | 6.7% | -- | -- | 3 | ₹688 | Exit load of 0.10%, if redeemed within 3 days. |
Axis Floating Interest Rates Fund | Debt | High | 1,426.49 | 0.22 | 7.4% | 8.4% | 7.2% | -- | -- | 1 | ₹148 | - |
Franklin India Floating Interest Rates Fund | Debt | Moderate | 48.19 | 0.38 | 6.9% | 8.2% | 7.2% | 6.9% | 7.0% | 3 | ₹281 | - |
Aditya Birla Sun Life Floating Interest Rate Direct Fund | Debt | Low to Moderate | 385.44 | 0.25 | 6.3% | 7.5% | 6.8% | 6.8% | 7.2% | 4 | ₹13,211 | - |
Kotak Floating Interest Rates Fund | Debt | Moderate | 1,668.17 | 0.2523 | 6.2% | 7.8% | 6.7% | 7.2% | -- | 3 | ₹3,424 | - |
Nippon India Floating Interest Rates Fund | Debt | Moderate | 50.96 | 0.35 | 5.8% | 7.5% | 6.5% | 7.2% | 7.3% | 2 | ₹7,507 | - |
Tata Floating Interest Rates Fund | Debt | Low to Moderate | 13.99 | 0.32 | 6.7% | 7.5% | 6.8% | -- | -- | 3 | ₹113 | - |
Bandhan Floating Interest Rates Fund | Debt | Moderate | 14.25 | 0.09 | 6.8% | 7.9% | 6.8% | -- | -- | 2 | ₹227 | - |
UTI Floating Interest Rates Fund | Debt | Low to Moderate | 1,685.33 | 0.44 | 6.5% | 7.2% | 6.3% | 6.5% | -- | 3 | ₹1,574 | - |
DSP Floating Interest Rates Fund | Debt | Moderate | 14.32 | 0.28 | 5.7% | 7.9% | 6.7% | -- | -- | 2 | ₹321 | - |
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Ideal investors in Floater mutual funds include the following:
Here are some key factors to keep in mind before investing in a floater mutual fund -
Before making an investment decision in a floater mutual fund, it is crucial to evaluate the current interest rate environment and the outlook for future interest rates. Floater mutual funds aim to capitalise on a rise in interest rates, making an environment of rising rates ideal for such funds.
A floater mutual fund performs the best in the short to medium-term, and it carries slightly higher risk than traditional debt instruments. One should assess their investment objective, investment horizon, and risk appetite before deciding to invest in floater mutual funds.
Typically, a floater mutual fund invests at least 65% in floating-rate securities. These securities have a varying interest rate. Fund managers also invest in fixed-income securities that are adjusted to reflect changes in interest rates.
Before picking a floater mutual fund, investors should know how the fund has performed in the past. It is important to compare the fund’s performance with interest rate changes, benchmark indices, and peers. Additionally, knowing the expense ratio, exit load, and other associated costs is vital while picking a fund to invest in.
Floater mutual funds perform best in an environment with rising interest rates. However, a decline in interest rates can lead to lower returns and lower coupon payments. Even when the interest rate remains stagnant, the fund may still underperform.
A floater mutual fund invests in securities with varying interest rates and credit ratings. Securities with lower credit ratings carry higher credit risk. Moreover, in volatile market conditions, specific securities may be hard to sell, leading to liquidity issues for the fund.
A floater mutual fund’s performance is also reliant on several other factors, such as the macroeconomic environment, geopolitical factors, and the monetary policy. These factors can negatively impact the broader market, hampering the performance of floater mutual funds.
A floater mutual fund is a debt mutual fund, and for units purchased after April 1, 2023, gains are taxed at the slab rate, irrespective of the investment's holding period. The gains from your investment will be considered as a part of your income and taxed at the applicable income tax rate.
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Fund Performance: The HDFC Floating Interest Rates Fund has given 7.63% annualized returns in the past three years and 6.85% in the last 5 years. The HDFC Floating Interest Rates Fund comes under the Debt category of HDFC Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in HDFC Floating Interest Rates Fund via lump sum is ₹100 and via SIP is ₹100.
| Min Investment Amt | ₹100 |
|---|---|
| AUM | ₹16,133Cr |
| 1Y Returns | 6.2% |
Fund Performance: The ICICI Prudential Floating Interest Rates Fund has given 7.92% annualized returns in the past three years and 7.07% in the last 5 years. The ICICI Prudential Floating Interest Rates Fund comes under the Debt category of ICICI Prudential Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Floating Interest Rates Fund via lump sum is ₹500 and via SIP is ₹100.
| Min Investment Amt | ₹500 |
|---|---|
| AUM | ₹9,118Cr |
| 1Y Returns | 6.9% |
Fund Performance: The SBI Floating Interest Rates Fund has given 7.62% annualized returns in the past three years and 6.73% in the last 5 years. The SBI Floating Interest Rates Fund comes under the Debt category of SBI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in SBI Floating Interest Rates Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹688Cr |
| 1Y Returns | 6.5% |
Fund Performance: The Axis Floating Interest Rates Fund has given 8.4% annualized returns in the past three years and 7.2% in the last 5 years. The Axis Floating Interest Rates Fund comes under the Debt category of Axis Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Axis Floating Interest Rates Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹148Cr |
| 1Y Returns | 7.4% |
Fund Performance: The Franklin India Floating Interest Rates Fund has given 8.19% annualized returns in the past three years and 7.19% in the last 5 years. The Franklin India Floating Interest Rates Fund comes under the Debt category of Franklin Templeton Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Franklin India Floating Interest Rates Fund via lump sum is ₹1,000 and via SIP is ₹500.
| Min Investment Amt | ₹1,000 |
|---|---|
| AUM | ₹281Cr |
| 1Y Returns | 6.9% |
Fund Performance: The Aditya Birla Sun Life Floating Interest Rate Direct Fund has given 7.49% annualized returns in the past three years and 6.75% in the last 5 years. The Aditya Birla Sun Life Floating Interest Rate Direct Fund comes under the Debt category of Aditya Birla Sun Life Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Aditya Birla Sun Life Floating Interest Rate Direct Fund via lump sum is ₹1,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹1,000 |
|---|---|
| AUM | ₹13,211Cr |
| 1Y Returns | 6.3% |
Fund Performance: The Kotak Floating Interest Rates Fund has given 7.79% annualized returns in the past three years and 6.71% in the last 5 years. The Kotak Floating Interest Rates Fund comes under the Debt category of Kotak Mahindra Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Kotak Floating Interest Rates Fund via lump sum is ₹100 and via SIP is ₹100.
| Min Investment Amt | ₹100 |
|---|---|
| AUM | ₹3,424Cr |
| 1Y Returns | 6.2% |
Fund Performance: The Nippon India Floating Interest Rates Fund has given 7.51% annualized returns in the past three years and 6.55% in the last 5 years. The Nippon India Floating Interest Rates Fund comes under the Debt category of Nippon India Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Nippon India Floating Interest Rates Fund via lump sum is ₹5,000 and via SIP is ₹100.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹7,507Cr |
| 1Y Returns | 5.8% |
Fund Performance: The Tata Floating Interest Rates Fund has given 7.5% annualized returns in the past three years and 6.76% in the last 5 years. The Tata Floating Interest Rates Fund comes under the Debt category of Tata Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Tata Floating Interest Rates Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹113Cr |
| 1Y Returns | 6.7% |
Fund Performance: The Bandhan Floating Interest Rates Fund has given 7.88% annualized returns in the past three years and 6.78% in the last 5 years. The Bandhan Floating Interest Rates Fund comes under the Debt category of IDFC Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Bandhan Floating Interest Rates Fund via lump sum is ₹1,000 and via SIP is ₹100.
| Min Investment Amt | ₹1,000 |
|---|---|
| AUM | ₹227Cr |
| 1Y Returns | 6.8% |
Fund Performance: The UTI Floating Interest Rates Fund has given 7.16% annualized returns in the past three years and 6.33% in the last 5 years. The UTI Floating Interest Rates Fund comes under the Debt category of UTI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in UTI Floating Interest Rates Fund via lump sum is ₹500 and via SIP is ₹500.
| Min Investment Amt | ₹500 |
|---|---|
| AUM | ₹1,574Cr |
| 1Y Returns | 6.5% |
Fund Performance: The DSP Floating Interest Rates Fund has given 7.86% annualized returns in the past three years and 6.69% in the last 5 years. The DSP Floating Interest Rates Fund comes under the Debt category of DSP Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in DSP Floating Interest Rates Fund via lump sum is ₹100 and via SIP is ₹100.
| Min Investment Amt | ₹100 |
|---|---|
| AUM | ₹321Cr |
| 1Y Returns | 5.7% |
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