Introduction:
In the ever-changing landscape of the financial market, investors often find themselves in search of stable yet lucrative investment avenues. One such option that has garnered attention in recent years is floating-rate mutual funds. These funds, known for their adaptability to changing interest rates, have gained popularity among investors seeking a balance between risk and return.
This blog explores the nuances of floating mutual funds. You will also find the list of the top floater mutual funds in India for investment in 2024. Keep reading.
What are floater mutual funds?
Floater mutual funds refer to mutual fund schemes that invest more than 65% of the assets in debt securities with floating interest rates. These securities feature fluctuating interest rates adjusted periodically in response to market conditions and available opportunities. For example, floater mutual funds may invest in corporate bonds, which offer a floating rate of interest, unlike government bonds. Government bonds usually offer a fixed rate of interest.
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Such a feature makes floater mutual funds less sensitive to interest rate fluctuations, making them an attractive option in a rising rate environment. However, you must know the following factors before investing in a floater mutual fund:
1. Goals
Floater mutual funds allocate their investments to floating rate instruments, whereby the interest payments adapt to fluctuating market rates, intending to mitigate interest rate risks.
2. Investment horizon
Floater mutual funds are best suited for investors with short to medium investment horizons of three to five years. You may look to benefit from rising interest rates.
3. Risks
Floater mutual funds carry moderate risks as they can adapt to the changing interest rates and invest predominantly in debt securities.
Top floater mutual funds in India in 2024
When evaluating the top floater mutual funds for investment, you can consider factors such as historical performance, fund manager’s expertise, expense ratio, portfolio quality, and risk management practices. Below are some top-rated floater mutual funds in 2024 you can consider:
1. ICICI Prudential Floating Interest Rate Fund
Backed by the expertise of ICICI Prudential Asset Management Company, this fund focuses on generating returns by investing predominantly in floating-rate debt instruments and fixed-rate debt instruments. Its disciplined investment approach and robust risk management strategies make it a preferred choice among investors. As of 18 March 2024, the total AUM (Assets Under Management) for this fund stood at Rs. 10,236 crores and the three-year return stood at 6.55%.
2. Aditya Birla Sun Life Floating Rate Fund
Managed by Aditya Birla Sun Life Mutual Fund, this fund aims to optimise returns by investing in a mix of floating-rate and fixed-rate debt instruments. With a flexible investment strategy and a focus on capital preservation, the fund offers a blend of stability and potential capital appreciation. As of 18 March 2024, the total fund size stood at Rs. 11,705 crores and the three-year return stood at 6.13%.
3. HDFC Floating Rate Debt Fund
Managed by HDFC Mutual Fund, this fund aims to generate returns through investments in floating-rate and fixed-rate debt instruments. With a strong track record of performance and a well-diversified portfolio, the fund stands out as a reliable option for investors seeking stability and growth potential. As of 18 March 2024, the AUM for the fund stood at Rs. 14,765 crores and the three-year return stood at 6.22%.
4. Kotak Floating Rate Fund
This fund, managed by Kotak Mutual Fund, seeks to provide regular income through investments in floating-rate debt instruments. With a prudent investment approach and a well-diversified portfolio, Kotak Floating Rate Fund has consistently delivered competitive returns while effectively managing risk. As of 18 March 2024, the AUM for this fund stood at Rs. 3,905 crores and the three-year return stood at 6.23%.
5. UTI Floater Fund
Managed by UTI Mutual Fund, this fund aims to generate income by investing in floating-rate debt instruments across various maturities. With a focus on credit quality and liquidity, this fund offers investors a balance between risk and return. As of 18 March 2024, UTI Floater Fund had an AUM of Rs. 1,485 crores. The three-year return stood at 5.65%.
To conclude
Floating-rate mutual funds, with their ability to adapt to fluctuating interest rates, offer a compelling choice for those seeking stability and growth potential. However, you must conduct thorough research, consider your investment objectives and risk tolerance, and consult with a financial advisor before making any investment decisions.
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