Baroda BNP Paribas mutual fund has launched Floating Rate Fund NFO, which would open for subscription on 10th April 2023. Floating rate funds 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 Baroda BNP Paribas Floater Fund NFO issue details and various risk factors associated with such funds.
Also Read: 5 Debt Funds with Highest SIP Returns in last 10 years
Baroda BNP Paribas Floater Fund – NFO Issue Details
Here are the NFO issue details.
| Scheme Opens | 10-Apr-23 |
| Scheme Closes | 24-Apr-23 |
| Scheme reopens for continuous purchase/sale | Within 5 business days |
| Minimum Lumpsum | Rs 5000 |
| Minimum SIP | Rs 500 for 6 months |
| NAV of the fund | Rs 10 during NFO period |
| Entry Load | Nil |
| Exit Load | Nil |
| Risk | Moderate Risk |
| Benchmark | CRISIL Low Duration Debt Index |
| Fund Manager | Mr. Mayank Prakash Mr. Prashant R Pimple |
| Max TER | 2.00% |
What is the investment objective of this MF scheme?
The primary objective of the scheme is 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 (including Fixed Rate Debt Instruments swapped for floating rate returns) |
65% | 100% | High |
| Debt & Money Market instruments | 0% | 35% | Low to Medium |
| Units issued by REITs & INvITs | 0% | 10% | Low to Medium |
Performance of existing Floating Rate Funds in India
Here is the performance of existing Floating Rate Funds in the last 5 to 10 years.
| Scheme Name | 3 Yrs | 5 Yrs | 10 Yrs |
|---|---|---|---|
| ICICI Pru Floating Interest Fund | 6.7% | 7.2% | 8.2% |
| ABSL Floating Rate Fund | 6.0% | 6.8% | 7.9% |
| Nippon India Floating Rate Fund | 6.4% | 7.0% | 7.9% |
| HDFC Floating Rate Debt Fund | 6.2% | 6.9% | 7.8% |
| Kotak Floating Rate Fund | 6.6% | – | – |
| UTI Floater Fund | 5.6% | – | – |
Why to invest in the Baroda BNP Paribas Floater Fund?
Here are a few reasons to invest in such debt funds.
1) This floating rate fund would invest in securities of central government, state government and private corporates which provides stable returns.
2) Floating Rate Funds have historically provided 6% to 8% annualized returns in the medium term though not guaranteed in the future.
Risk factors of investing in such funds
One should consider some of these risk factors / negative factors before investing.
1) These days bank FDs are providing higher interest rates on FDs compared to floater rate funds.
2) This fund would invest in floating rate instruments and returns are not fixed. Such returns might fluctuate highly in short to medium term to long term.
3) This fund can invest up to 50% in derivatives which is high risk.
4) Since it invests in debt instruments of corporates (other than government), such instruments would have credit risk, default risk and liquidity risk.
4) The scheme would invest up to 10% in REITs and InvITs which are high risk.
5) You can refer complete risk factors of investing in this scheme in SID / KIM.
Also Read: Worst Performing Mutual Fund in short term to long term
Should you invest in Baroda BNP Paribas Floater Fund NFO?
Baroda BNP Paribas Floater Fund (New Fund Offer) would invest in securities and debt instruments that have a variable or floating rate of interest. Such funds can provide stable returns. In the medium to long term, these have generated 6% to 8% annualized returns though not guaranteed in the future.
On the other side it invests in corporate debt instruments, up to 50% in derivatives and up to 10% in REITs and InvITs where there is an element of risk.
Floating Rate Funds would protect investors from volatile interest rates. Currently bank FDs are providing higher interest rates, hence investors can take a call to invest in any of them i.e. bank FD’s or floater rate funds which provide similar returns.
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