• हिन्दी
  • ગુજરાતી
  • বাংলা
  • తెలుగు
  • मराठी
  • ಕನ್ನಡ
  • money9
  • Insurance
  • Saving
  • Mutual Funds
  • Mirae Asset MF
  • Breaking Briefs
downloadDownload The App
Close
  • Home
  • Videos
  • Podcast
  • Banking
  • Bulletin
  • Gold
  • Healthcare
  • Real Estate
  • Tax
  • Travel
  • Survey 2023
  • Survey Report
  • Breaking Briefs
  • Insurance
  • Savings
  • Loan
  • Crypto
  • Investment
  • Mutual Funds
  • Real Estate
  • Tax
  • Exclusive
  • Home / Investment

Here’s why fund managers are swearing by floating rate funds

Floating rate funds benefit by providing a better hedge for volatile rates.

  • Money9
  • Last Updated : September 13, 2021, 14:17 IST
  • Follow
The prices of bonds fall as interest rates increase.
  • Follow

In the past three months floating rate funds received the highest inflow of Rs 23,734 crore within the debt fund category, as per the industry estimates. According to a report by The Economic Times, the enthusiasm towards floating-rate funds is a result of a belief among the investors that the interest rate cycle is about to reverse.

The business daily quoted a senior fund manager at ICICI Prudential Mutual Fund, Manish Banthia, as saying, “We are at the fag-end of interest rate-cut cycle. We expect rates to be volatile due to moderation in RBI stance and liquidity. Floating rate schemes stand to benefit by providing a better hedge for such market scenarios.” By investing in floating rate funds the investors are looking to shield their debut mutual fund portfolios, the report added.

How floater funds help those with fixed incomes

The floating rate fund investments are done either in floating rate instruments or in fixed coupon instruments, which are converted to floating rates by using swaps or overnight index swap (OIS).

According to another executive quoted by the Economic Times, R Sivakumar, head of fixed income, Axis MF, the investors could use a floating rate fund to diversify their fixed income portfolios. He added that the debt portfolios of most investors are of long durations and at a time when interest rates are rising, floating rate funds would be effective since they have a lower sensitivity to interest rates, leading to lower risk.

The growth of fixed-rate bonds is inversely related to interest rate changes, according to experts. The prices of bonds fall as interest rates increase.

Timely, as RBI may normalise liquidity

Nirav Karkera, head of research, Fisdom, told Economic Times that floater funds were suited for investors with a time frame of 1-2 years looking to dynamically capture interest rate movements.

The fund managers believe that with the economy picking up pace, RBI may be forced to normalise liquidity, which could result in rate hikes. The fund managers believe higher inflation and commodity prices minimise headroom for the RBI to keep policy rates at current levels. The global inflationary cycle could also have an impact on the interest rates in the country, ET reported quoting the fund managers.

Published: September 13, 2021, 14:17 IST

Download Money9 App for the latest updates on Personal Finance.

  • Floating Rate Funds
  • investment
  • mutual fund investments

Related

  • पहली छमाही में रियल एस्टेट में संस्थागत निवेश 37% घटकर तीन अरब डॉलर रहने का अनुमान
  • Budget’24: New LTCG rule to hit long-term property owners hard
  • Looking to buy gold? Buy now before it’s too late!
  • Budget 2024: What is NPS ‘Vatsalya’ scheme? How to apply & other benefits?
  • Budget’ 24: Startup ecosystem all smiles with scrapping of angel tax
  • Budget’24: New NPS scheme for minors launched, here’s how you can benefit

Latest

  • 1. Know the correct way to get KYC done!
  • 2. Why health insurance claim gets rejected?
  • 3. Power to Respond!
  • 4. What is Asset Under Management?
  • 5. No Worries on Medical Expenses!
  • Trending Stories

  • आयकर रिफंड में 2013-14 से 474 प्रतिशत की वृद्धि, पिछले 11 वर्षों में जारी करने का समय हुआ बेहतर
  • वेतन वृद्धि टीसीएस की प्राथमिकता; लाभप्रदता के साथ वृद्धि पर ध्यान: सीएफओ
  • डीएलएफ के पास बाजार की आकांक्षी जरूरतों को पूरा करने के लिए मजबूत पाइपलाइन: चेयरमैन
  • बिट्स पिलानी विस्तार, अमरावती में नए परिसर पर 2,200 करोड़ रुपये का निवेश करेगा
  • एयर इंडिया पायलटों के साथ विमान दुर्घटना की प्रारंभिक रिपोर्ट की समीक्षा करेगी
  • TV9 Sites

  • TV9 Hindi
  • TV9Telugu.com
  • TV9 Marathi
  • TV9 Gujarati
  • TV9 Kannada
  • TV9 Bangla
  • News9 Live
  • Trends9
  • Tv9tamilnews
  • Assamtv9
  • Malayalamtv9
  • Money9 Sites

  • Money9 Hindi
  • Money9 English
  • Money9 Marathi
  • Money9 Telugu
  • Money9 Gujarati
  • Money9 Kannada
  • Money9 Bangla
  • Money9live
  • Topics

  • Insurance
  • Savings
  • Loan
  • Stocks
  • Mutual Funds
  • Real Estate
  • Tax
  • Crypto
  • Exclusive
  • Follow us

  • FaceBook
  • Twitter
  • Youtube
  • Instagram
  • Linkedin
  • Download App

  • play_store
  • App_store
  • Contact Us
  • About Us
  • Advertise With Us
  • Privacy & Cookies Notice
  • Complaint Redressal
  • Copyright © 2025 Money9. All rights reserved.
  • share
  • Facebook
  • Twitter
  • Whatsapp
  • LinkedIn
  • Telegram
close