IDFC Launches Floating Rate Fund NFO – Review
IDFC mutual fund is launching Floating Rate Fund that would open for subscription on 10th February, 2021. Floating Rate 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 IDFC Floating Rate Fund NFO issue details and various risk factors associated with such funds.
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IDFC Floating Rate Fund NFO – Issue Details
This is an open-ended equity mutual fund scheme.
| IDFC Floating Rate Fund NFO – Issue Details | |
|---|---|
| Scheme Opens | 10-Feb-21 |
| Scheme Closes | 16-Feb-21 |
| Scheme reopens for continous purchase/sale | Within 5 working days from closure of NFO |
| Minimum Lumpsum | Rs 5,000 |
| Minimum SIP | Rs 1,000 for 6 months |
| NAV of the fund | Rs 10 during NFO period |
| Entry Load | Nil |
| Exit Load | Nil |
| Risk | Moderate Risk |
| Max Total expense Ratio (TER) | 2.00% |
| Benchmark | NIFTY Low Duration Debt Index |
Download IDFC Floating Rate Fund SID
What is the investment objective of this MF scheme?
The Fund seeks to generate returns by creating a portfolio that is primarily invested in floating rate instruments, including fixed rate instruments swapped for floating returns and other debt and money market instruments.
There is no assurance or guarantee that the investment objective of the scheme will be realized.
Who is eligible to invest in this mutual fund scheme?
The following can invest in this scheme.
1) Indian resident adult individuals, either singly or jointly.
2) Minors through Parents/Lawful Guardian.
3) Hindu Undivided Family (HUF) through its Karta.
4) Partnership Firms in the name of any one of the partners.
5) Proprietorship in the name of the sole proprietor.
6) Companies, Body Corporate, Societies, Association of Persons, Body of Individuals, Clubs and Public Sector Undertakings registered in India if authorized and permitted to invest under applicable laws and regulations.
7) Banks
8) Non-Resident Indians (NRIs) / Persons of Indian Origin (PIO) on full repatriation basis or on non-repatriation basis;
Complete list of eligible participants who can invest can be checked in the NFO prospectus.
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 instruments (including fixed rate instruments converted to floating rate exposures using swaps / derivatives) | 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 IDFC Floating Rate Fund?
Here are a few reasons to invest in such debt funds.
1) This Floating Rate Fund would invest 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 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.
2) Since it invests in debt instruments, these would carry credit risk, default risk and liquidity risk.
3) The scheme may invest in derivatives up to 100% of the net assets of the scheme and up to 10% in REITs and InvITs which are high risk.
4) Scheme also intends to invest in foreign debt instruments where there could be geopolitical risks and exchange rate risk.
5) You can refer complete risk factors of investing in this particular scheme in SID / KIM.
Performance of existing Floating Rate Funds in India
Here is the performance of existing floating rate funds in the last 1 to 5 years.
| Fund Name | 1 Year | 3 Year | 5 Year |
|---|---|---|---|
| Aditya Birla Sun Life Floating Rate Fund | 7.7% | 8.0% | 8.1% |
| HDFC Floating Rate Debt Fund | 8.7% | 8.2% | 8.1% |
| Nippon India Floating Rate Fund | 10.3% | 8.4% | 8.0% |
| ICICI Prudential Floating Interest Fund | 9.0% | 8.1% | 8.0% |
| Franklin India Floating Rate Fund | 5.5% | 6.6% | 6.4% |
| HDFC Floating Rate Debt Fund | 8.7% | 8.2% | 8.1% |
| Nippon India Floating Rate Fund | 10.3% | 8.4% | 8.0% |
| ICICI Prudential Floating Interest Fund | 9.0% | 8.1% | 8.0% |
| Franklin India Floating Rate Fund | 5.5% | 6.6% | 6.4% |
Also Read: Top Mutual Funds to get regular and steady income
Should you invest in IDFC Floating Rate Fund NFO?
IDFC Floating Rate Fund invests in securities and debt instruments that has variable or floating rate of interest. It also invests up to 100% in derivatives, 10% in REITs and InvITs and up to 25% in foreign debt instruments which is high risk. Floating rate 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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Dear Brother,
There are some type of debt fund [i believe bond fund] will provide good return when interest is low and return will reduce when the interest rate increase.
Is it applicable for this fund as well ? Because, currently interest rate is very low and definitely RBI increase it due to inflation.
Good information with thorough analysis. Thanks
nice article, Thanks for posting
Thank you Lovenish