DSP Launches Floater Fund NFO – Review
The DSP mutual fund has launched Floater Fund, which is now open for subscription. Floater Funds are mutual funds that invests 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 or floating rate of interest. In this article we would provide DSP Floater Fund NFO issue details and various risk factors associated with such funds.
DSP Floater Fund NFO – Issue Details
This is an open-ended equity mutual fund scheme.
| Scheme Opens | 04-Mar-21 |
| Scheme Closes | 17-Mar-21 |
| Scheme reopens for continuous purchase/sale | Within 5 days from date of allotment |
| Minimum Lumpsum | Rs 500 for 12 months |
| Minimum SIP | Rs 500 for 6 months |
| NAV of the fund | Rs 10 during NFO period |
| Entry Load | Nil |
| Exit Load | Nil |
| Risk | Moderate |
| Max expense Ratio (TER) | 2.00% |
| Benchmark | CRISIL Short Term Gilt Index |
Download DSP Floater Fund KIM
What is the investment objective of this MF scheme?
The primary objective of the scheme is to generate regular income through investment predominantly in floating rate and fixed rate debt instruments (including 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 Securities (including fixed rate Securities converted to floating rate exposures using swaps/ derivatives) |
65% | 100% | Low to medium |
| Fixed Rate Debt Securities (including money market | 0% | 35% | Low to medium
|
Why to invest in the DSP Floater Fund?
Here are a few reasons to invest in such debt funds.
1) This Floater Fund would invest securities of central government, state government and private corporates which provides stable returns.
2) Floater Funds have historically provided 6.5% to 8.5% annualized returns in the last 10 years though not guaranteed. If you are looking for returns higher than bank FDs, one can invest in such funds.
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 and returns are not fixed. This might fluctuate highly in short to medium term to long term.
2) Since it invests in debt instruments of corporates (other than government), these would carry credit risk, default risk and liquidity risk.
3) The Scheme may invest in debt instruments having Structured Obligations / Credit Enhancements up to 10% of the debt portfolio of the Scheme
4) You can refer complete risk factors of investing in this particular scheme in SID / KIM.
Performance of existing Floater Funds in India
Here is the performance of existing Floater Funds in the last 1 to 5 years.
| Fund Name | 1 Year | 3 Year | 5 Year |
|---|---|---|---|
| Franklin India Floating Rate Fund | 6% | 6% | 7% |
| ICICI Prudential Floating Interest Fund | 8% | 8% | 8% |
| Nippon India Floating Rate Fund | 8% | 8% | 8% |
| HDFC Floating Rate Debt Fund | 8% | 8% | 9% |
| Aditya Birla Sun Life Floating Rate Fund | 8% | 8% | 9% |
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Should you invest in DSP Floater Fund NFO?
DSP Floater Fund invests in securities and debt instruments that has variable or floating rate of interest. It invests in corporate debt instruments and also up to 100% in derivatives which are high risk. Floater Funds would protect investors from volatile interest rates. These funds would provide higher returns compared to any fixed deposits. Moderate risk investors can invest in this fund for a short to medium term of 2 to 3 years.
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