Tata Launches Floating Rate Fund NFO Review
Tata mutual fund has launched Floating Rate Fund NFO, which would open for subscription on 21st June, 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 / floating rate of interest. In this article we would provide Tata Floating Rate Fund NFO issue details and various risk factors associated with such funds.
Also Read: Top Performing Debt Mutual Funds in last 1 year
Tata Floating Rate Fund – NFO Issue Details
Tata Floating Rate Fund NFO opens on Monday 21st June, 2021 and closes on Monday 5th July, 2021. This is an open-ended equity mutual fund scheme.
|Scheme reopens for continuous purchase/sale||After 5 working days from closure|
|Minimum Lumpsum||Rs 5,000|
|Minimum SIP||Rs 1,000 for 6 months|
|NAV of the fund||Rs 10 during NFO period|
|Max expense Ratio (TER)||2.00%|
|Benchmark||CRISIL Ultra Short Term Debt Index|
Tata Floating Rate Fund SID (Draft)
What is the investment objective of this MF scheme?
This is an open-ended debt scheme investing predominantly in floating rate instruments (including fixed rate instruments converted to floating rate exposures using swaps/ derivatives).
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 securities (including fixed rate securities converted to floating rate exposures using swaps /
|65%||100%||Low to Medium|
|Fixed rate debt securities, securitized debt, money market instruments||0%||35%||Low to Medium|
|Units issued by REITs and InvITs||0%||10%||Medium to High|
|Units of domestic mutual fund schemes||0%||35%||Low to Medium|
Why to invest in the Tata Floating Rate 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 6.1% to 8.8% annualized returns in the last 3-5 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. Such returns might fluctuate highly in short to medium term to long term.
2) This fund can invest up to 100% in derivatives which is high risk.
3) 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.
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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 Yr||3 Yrs||5 Yrs|
|Aditya Birla Sun Life Floating Rate Fund||5.9%||7.8%||7.7%|
|Franklin India Floating Rate Fund||4.9%||6.2%||6.1%|
|HDFC Floating Rate Debt Fund||7.1%||8.0%||7.7%|
|ICICI Prudential Floating Interest Fund||7.5%||7.8%||7.5%|
|Nippon India Floating Rate Fund||7.3%||8.8%||7.8%|
Should you invest in Tata Floating Rate Fund NFO?
Tata Floating Rate Fund (New Fund Offer) would invest in securities and debt instruments that has variable or floating rate of interest. It invests in corporate debt instruments, up to 100% 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. These funds would provide higher returns compared to bank fixed deposits. Moderate risk investors can invest in this fund for short to medium term of 2 to 3 years.
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Thank you ,sir
Sir, what’s your opinion on srei equipment and srei infrastructure NCD ? I have invested around 1 lac in both these NCDs, which were supposed to get matured in 2021.
Pooja, SREI group has asked for loan payment moratorium for 6 months from Jan to Jun-21. Post this date, ideally they should start repayment to vendor and NCD investors. You need to wait to hear from them