Axis Floater Fund NFO Review
Axis MF has launched Floater Fund NFO which would open for subscription on 12th July 2021. Floater funds would invest majorly in floating rate instruments including fixed rate instruments converted to floating rate exposures using swaps / derivatives. In simple terms, it invests in financial instruments with variable / floating rate of interest. In this article we would provide Axis Floater Fund NFO issue details and various risk factors associated with such funds.
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Axis Floater Fund – NFO Issue Details
Axis Floater Fund NFO opens for subscription on Monday 12th July 2021 and closes on Monday 26th July 2021. This is an open-ended equity mutual fund scheme which would open for subscription after 5 days from the initial subscription closure period.
| Scheme Opens | 12-Jul-21 |
| Scheme Closes | 26-Jul-21 |
| Scheme reopens for continuous purchase/sale | Within 5 days from closure |
| Minimum Lumpsum | ₹ 5,000 |
| Minimum SIP | ₹ 1,000 for 6 months |
| NAV of the fund | ₹ 10 during NFO period |
| Entry Load | Nil |
| Exit Load | Nil |
| Risk | Moderate |
| Benchmark | NIFTY Ultra Short Duration Debt Index |
What are floating rate instruments?
These are debt instruments which carry variable interest rates and are linked to market prices. Below illustration would help you to understand it better (Source: Axis MF presentation).
What is the investment objective of this MF scheme?
To generate regular income through investment in a portfolio comprising predominantly of floating rate instruments and fixed rate instruments swapped for floating rate returns. The scheme may also invest a portion of its net assets in fixed rate debt and money market instruments.
There is no assurance or guarantee that the investment objective of the scheme will be realized.
What is the allocation pattern in this mutual fund?
This fund investment pattern is as follows:
| Type of instruments | Min % | Max % | Risk Profile |
|---|---|---|---|
| Floating Rate Debt Instruments | 65% | 100% | Low to Medium |
| Debt and Money Market Instruments | 0% | 35% | Low to Medium |
| Units issued by REITs and InvITs | 0% | 10% | Medium to High |
Why to invest in the Axis Floater Fund?
Here are a few reasons to invest in such debt funds.
1) This Floater Fund would invest 80% in AAA/SOV debt instruments + 20% in AA rated instruments which can be considered safe compared to A and below rated debt instruments.
2) Floater Funds have historically provided 6% to 8% annualized returns in the last 1-5 years though not guaranteed. If you are looking for returns higher than bank FDs, one can invest in such funds.
3) Currently we are at the cusp of the new growth cycle + bottom of the interest rate cycle. Investing at this time can provide good returns in the medium term.
Some key risk factors you should consider before you invest in such funds
One should consider some of these risk factors / negative factors before investing.
1) This fund would invest in floating rate instruments where returns are not fixed. Such returns might fluctuate highly in short to medium term to long term.
2) Since it invests in debt instruments of corporates (other than government), such instruments would have credit risk, default risk and liquidity risk.
3) The scheme would invest up to 10% in REITs and InvITs which are high risk.
4) You can refer complete risk factors of investing in this scheme in SID / KIM.
Performance of existing Floating Rate Funds in India
Here is the performance of existing floating rate mutual funds in the last 6 months to 2 years. 2 Years returns are annualised.
| Scheme Name | 6 Mnths | 1 Yr | 2 Yrs |
|---|---|---|---|
| Nippon India Floating Rate Fund | 1.6% | 5.4% | 8.5% |
| Kotak Floating Rate Fund | 1.2% | 5.6% | 7.8% |
| ICICI Prudential Floating Interest Fund | 1.7% | 6.1% | 7.7% |
| HDFC Floating Rate Debt Fund | 1.9% | 6.0% | 7.6% |
| Aditya Birla Sun Life Floating Rate Fund | 1.6% | 4.9% | 7.2% |
| UTI Floater Fund | 1.5% | 3.6% | 6.2% |
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Should you invest in Axis Floater Fund?
Axis Floater Fund (New Fund Offer) would invest 80% in AAA / Govt debt instruments and 20% in AA rated debt instruments which is relatively safe investment option. It invests in corporate debt instruments and up to 10% in REITs and InvITs where there is an element of risk. Floater Funds would protect investors from volatile interest rates. These funds would provide higher returns compared to bank fixed deposits. However, in the last 1 year, due to various reasons, funds under this segment have under performed. This fund aims to provide higher returns by investing in 6 months to 18 months debt instruments. Low to Moderate risk investors can park their surplus funds in this fund for a short term of 1 to 2 years tenure.
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5 comments
Add a comment ↓Hi Suresh, Please your expert opinion needed
a) If foll funds can be continued ? If no, then which funds to be replaced with which other fund?
b) If lumpsum can be made in these when market falls ?
c) Any fund wherein SIP has to be increased or reduced ?
Monthly Sip in following
1. Axis Mid Cap – 10000
2. Quantum Tax Saving – 10000
3. SBI Small Cap – 15000
4. Axis Blue Chip – 20000
5. Canara Robeco Equity Hybrid – 20000
6. Motilal Oswal Nasdaq 100 Fund of Fund – 10000
Good Funds Nanmith. Smallcap/midcap/NASDAQ fund are high risk funds. If you are high risk, you can continue else you may shift to largecap/flexi cap funds. Also there is no flexicap fund in your portfolio. You can add 1-2 flexicap funds like Parag Parikh Flexicap fund or Kotak Standard flexicap fund etc.
Thanks so much. Have added parag flexi
Suresh Brother, why you removed the ‘Search’ option in the site. It was very useful for me when ever i want to search your old articles. Please re-include it.
Ranjith. We were doing technical changes and had to remove it earlier. I just added back search button.