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Top 4 Best Floating Rate Funds 2022 - Fincash

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Top 4 Best Floating Rate Funds 2022

Updated on June 23, 2022 , 13871 views

A floating rate fund invests in financial securities that pay a floating or variable rate of interest. A floating rate fund that may be a Mutual Fund or an exchange-traded fund (ETF) invests in Bonds and financial instruments whose interest payments fluctuate with the level of the Underlying interest rate.

As a result, a fixed-rate investment will typically provide a steady and predictable Income. On the other hand, fixed-rate investments lag behind the Market as interest rates rise since their returns are fixed.

As per Security and Exchange Board of India (SBEI) norms, Floater Fund should invest a minimum of 65 percent of its total assets in the floating rate instrument.

In an environment of rising rates, the floating rate funds strive to provide investors with a variable interest income. As a result, as investors seek to increase the yield on their portfolios, floating-rate funds have grown in favour.

What are Floating Rate Funds?

The floating rate instrument is considered to be an attractive instrument for investors with a conservative portion. This fund invests a major portion of its corpus in floating rate instruments and rest in Fixed Income securities. They are least risky in terms of interest rate. Unlike other debt funds, floating rate funds do not react to the changing interest rates. When the Government of India issues bond in the market, they have a fixed coupon rate, whereas, floating rate securities have variable interest rates. These floating rate interest increases or decreases based on the Reference Rate. To benefit the most, one should invest in these funds when interest rates are expected to rise.

But, being a Debt fund, the credit risk in the fund still remains. Credit risk arises when a company that has issued the debt instruments does not make regular payments. In such cases, it has a major impact on the fund, depending on how much portion the fund has in the portfolio. Hence, it is suggested to be in debt instruments with a rating higher credit rating.

There are two kinds of floating rate funds— short-term and long-term. The portfolio of short-term floating funds is normally skewed towards short-term maturities and the portfolio of the long-term plan is skewed towards longer-term maturities.

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Work of Floating Rate Fund

Even though there is no formula for calculating a floating rate fund, it can be made up of various investments. Corporate bonds, preferred stocks, and loans with maturities ranging from one month to five years are examples of floating-rate funds. Corporate loans and mortgages can also be included in floating rate funds.

Floating rate loans refer to Bank loans to businesses. These loans are occasionally bundled and sold to investors as a fund. Floating rate loans are related to securities backed by mortgages, the packaged mortgages into which investors can buy and get an overall return rate from the fund's various mortgage rates.

Senior debt, such as floating-rate loans, has a more extraordinary claim on a company's assets in case of a Default. However, the term "senior" does not refer to credit quality; instead, it refers to the sequence in which creditors might claim a firm's assets to repay a debt if the company defaults. For example, floating-rate funds may invest in the floating rate bonds, the debt products in which the interest paid changes over time.

What to Infer from a Floating Rate Fund?

When compared to a fund or instrument with a fixed payment rate or fixed bond coupon rate, the primary advantage of a floating rate fund is its lower susceptibility to interest rate swings. As a result, investors choose floating rate funds to get a higher degree of interest or coupon payments when interest rates rise.

Floating rate funds are a good choice for the fixed income or conservative part of your portfolio. Floating rate debt, such as bonds and loans, can be held in a floating rate fund. These funds, like other credit funds, are administered with a variety of aims. For example, credit quality and duration can be targeted with strategies. The rates held in a floating rate fund and payable on a floating rate instrument adjust in response to a set of parameters or a defined interest rate level.

Floating rate funds are less susceptible to duration risk. The risk that the rate of interest will go up while an investor holds a fixed-income investment, causing them to miss higher market rates, is known as duration risk.

The income created by the underlying investments of a variable rate fund is handled by the portfolio managers and distributed to shareholders regularly. In addition, income and Capital gains may be distributed. Monthly payments are common, but they can also be made semi-annually, quarterly, or annually.

Aside from lower interest rate sensitivity and flexibility for the reflection of current interest rates, a floating rate fund allows an investor to diversify fixed-income investments, as those instruments typically make up the majority of bond holdings for the majority of the investors. Another advantage of a variable rate fund is that it allows an investor to purchase a diversified bond or loan portfolio for a low investment threshold instead of Investing in individual products for a higher dollar amount.

Investors must ensure that the securities in a variable rate fund are appropriate for their risk tolerance while reviewing the fund. Floating rate funds carry various risk levels across the credit quality spectrum, with high-yielding, lower-credit-quality investments posing significantly more significant hazards. However, with greater threats comes the possibility of greater reward.

Best Floating Rate Funds 2022

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2021 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Aditya Birla Sun Life Floating Rate Fund - Long Term Growth ₹278.939
↑ 0.05
₹13,7970.61.73.563.66.43%8M 5D1Y 5M 12D
Nippon India Floating Rate Fund Growth ₹36.1906
↑ 0.01
₹13,47300.92.96.73.75.75%1Y 1M 17D1Y 6M 4D
ICICI Prudential Floating Interest Fund Growth ₹335.242
↓ -0.09
₹15,667-0.3-0.11.75.83.86.13%10M 13D7Y 7M 10D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 24 Jun 22

1. Aditya Birla Sun Life Floating Rate Fund - Long Term

The primary objective of the schemes is to generate regular income through investment in a portfolio comprising substantially of floating rate debt / money market instruments. The schemes may invest a portion of its net assets in fixed rate debt securities and money market instruments.

Aditya Birla Sun Life Floating Rate Fund - Long Term is a Debt - Floating Rate fund was launched on 25 Mar 09. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 8% since its launch.  Ranked 14 in Floating Rate category.  Return for 2021 was 3.6% , 2020 was 8.6% and 2019 was 8.6% .

Below is the key information for Aditya Birla Sun Life Floating Rate Fund - Long Term

Aditya Birla Sun Life Floating Rate Fund - Long Term
Growth
Launch Date 25 Mar 09
NAV (24 Jun 22) ₹278.939 ↑ 0.05   (0.02 %)
Net Assets (Cr) ₹13,797 on 15 Jun 22
Category Debt - Floating Rate
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk Moderately Low
Expense Ratio 0.38
Sharpe Ratio -0.07
Information Ratio 0
Alpha Ratio 0
Min Investment 1,000
Min SIP Investment 1,000
Exit Load NIL
Yield to Maturity 6.43%
Effective Maturity 1 Year 5 Months 12 Days
Modified Duration 8 Months 5 Days

Growth of 10,000 investment over the years.

DateValue
31 May 17₹10,000
31 May 18₹10,639
31 May 19₹11,575
31 May 20₹12,582
31 May 21₹13,356
31 May 22₹13,837

Aditya Birla Sun Life Floating Rate Fund - Long Term SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹200,132.
Net Profit of ₹20,132
Invest Now

Returns for Aditya Birla Sun Life Floating Rate Fund - Long Term

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 24 Jun 22

DurationReturns
1 Month 0.3%
3 Month 0.6%
6 Month 1.7%
1 Year 3.5%
3 Year 6%
5 Year 6.6%
10 Year
15 Year
Since launch 8%
Historical performance (Yearly) on absolute basis
YearReturns
2021 3.6%
2020 8.6%
2019 8.6%
2018 7.5%
2017 6.9%
2016 9.5%
2015 8.9%
2014 9.6%
2013 9.6%
2012 10.1%
Fund Manager information for Aditya Birla Sun Life Floating Rate Fund - Long Term
NameSinceTenure
Kaustubh Gupta14 Jun 147.97 Yr.
Harshil Suvarnkar22 Mar 211.19 Yr.

Data below for Aditya Birla Sun Life Floating Rate Fund - Long Term as on 15 Jun 22

Asset Allocation
Asset ClassValue
Cash25.51%
Debt74.49%
Debt Sector Allocation
SectorValue
Corporate48.74%
Government37.98%
Cash Equivalent13.27%
Credit Quality
RatingValue
AAA100%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
3.8% Govt Stock 2024
Sovereign Bonds | -
6%₹1,010 Cr102,000,000
↑ 10,500,000
5.53% Govt Stock 2033
Sovereign Bonds | -
4%₹704 Cr71,000,000
Sikka Ports & Terminals Limited
Debentures | -
3%₹494 Cr4,850
08.21 HR UDAY 2023
Domestic Bonds | -
2%₹372 Cr36,603,700
National Bank For Agriculture And Rural Development
Debentures | -
2%₹347 Cr3,500
L&T Finance Limited
Debentures | -
2%₹328 Cr3,250
Reliance Industries Limited
Debentures | -
2%₹311 Cr3,000
National Bank For Agriculture And Rural Development
Debentures | -
2%₹308 Cr3,100
Mahindra & Mahindra Financial Services Ltd
Debentures | -
2%₹298 Cr3,000
Nabha Power Limited
Debentures | -
2%₹296 Cr3,000

2. Nippon India Floating Rate Fund

(Erstwhile Reliance Floating Rate Fund - Short Term Plan)

The primary objective of the scheme is to generate regular income through investment in a portfolio comprising substantially of Floating Rate Debt Securities (including floating rate securitized debt, Money Market Instruments and Fixed Rate Debt Instruments swapped for floating rate returns). The scheme shall also invest in Fixed rate Debt Securities (including fixed rate Securitized Debt, Money Market Instruments and Floating Rate Debt Instruments swapped for fixed returns).

Nippon India Floating Rate Fund is a Debt - Floating Rate fund was launched on 27 Aug 04. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 7.5% since its launch.  Ranked 32 in Floating Rate category.  Return for 2021 was 3.7% , 2020 was 11.3% and 2019 was 9% .

Below is the key information for Nippon India Floating Rate Fund

Nippon India Floating Rate Fund
Growth
Launch Date 27 Aug 04
NAV (24 Jun 22) ₹36.1906 ↑ 0.01   (0.02 %)
Net Assets (Cr) ₹13,473 on 31 May 22
Category Debt - Floating Rate
AMC Nippon Life Asset Management Ltd.
Rating
Risk Moderately Low
Expense Ratio 0.56
Sharpe Ratio -0.63
Information Ratio 0.22
Alpha Ratio -0.02
Min Investment 5,000
Min SIP Investment 100
Exit Load 0-1 Months (0.5%),1 Months and above(NIL)
Yield to Maturity 5.75%
Effective Maturity 1 Year 6 Months 4 Days
Modified Duration 1 Year 1 Month 17 Days

Growth of 10,000 investment over the years.

DateValue
31 May 17₹10,000
31 May 18₹10,474
31 May 19₹11,377
31 May 20₹12,510
31 May 21₹13,467
31 May 22₹13,869

Nippon India Floating Rate Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹200,132.
Net Profit of ₹20,132
Invest Now

Returns for Nippon India Floating Rate Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 24 Jun 22

DurationReturns
1 Month 0.3%
3 Month 0%
6 Month 0.9%
1 Year 2.9%
3 Year 6.7%
5 Year 6.6%
10 Year
15 Year
Since launch 7.5%
Historical performance (Yearly) on absolute basis
YearReturns
2021 3.7%
2020 11.3%
2019 9%
2018 5.8%
2017 5.9%
2016 9%
2015 8.6%
2014 9.8%
2013 7.9%
2012 9.7%
Fund Manager information for Nippon India Floating Rate Fund
NameSinceTenure
Anju Chhajer1 Feb 202.33 Yr.
Kinjal Desai25 May 184.02 Yr.

Data below for Nippon India Floating Rate Fund as on 31 May 22

Asset Allocation
Asset ClassValue
Cash9.14%
Debt90.86%
Debt Sector Allocation
SectorValue
Corporate52.05%
Government37.85%
Cash Equivalent8.63%
Securitized1.46%
Credit Quality
RatingValue
AAA100%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.35% Govt Stock 2024
Sovereign Bonds | -
7%₹967 Cr95,000,000
↑ 3,000,000
State Bank Of India
Debentures | -
4%₹620 Cr6,050
Bajaj Housing Finance Limited
Debentures | -
3%₹454 Cr4,650
Reliance Industries Limited
Debentures | -
3%₹352 Cr3,500
Tata Capital Limited
Debentures | -
2%₹299 Cr3,000
7.68% Govt Stock 2023
Sovereign Bonds | -
2%₹291 Cr28,500,000
Tata Capital Housing Finance Limited
Debentures | -
2%₹289 Cr2,950
L&T Finance Limited
Debentures | -
2%₹289 Cr2,850
Reliance Industries Limited
Debentures | -
2%₹285 Cr2,750
Larsen And Toubro Limited
Debentures | -
2%₹277 Cr2,750

3. ICICI Prudential Floating Interest Fund

(Erstwhile ICICI Prudential Savings Fund)

The scheme aims to generate income consistent with the prudent risk from a portfolio comprising floating rate debt instruments, fixed rate debt instruments swapped for floating rate return, and also fixed rate instruments & money market instruments.

ICICI Prudential Floating Interest Fund is a Debt - Floating Rate fund was launched on 18 Nov 05. It is a fund with Moderate risk and has given a CAGR/Annualized return of 7.6% since its launch.  Ranked 35 in Floating Rate category.  Return for 2021 was 3.8% , 2020 was 9.5% and 2019 was 8.4% .

Below is the key information for ICICI Prudential Floating Interest Fund

ICICI Prudential Floating Interest Fund
Growth
Launch Date 18 Nov 05
NAV (24 Jun 22) ₹335.242 ↓ -0.09   (-0.03 %)
Net Assets (Cr) ₹15,667 on 31 May 22
Category Debt - Floating Rate
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk Moderate
Expense Ratio 1.35
Sharpe Ratio -0.49
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 100
Exit Load NIL
Yield to Maturity 6.13%
Effective Maturity 7 Years 7 Months 10 Days
Modified Duration 10 Months 13 Days

Growth of 10,000 investment over the years.

DateValue
31 May 17₹10,000
31 May 18₹10,571
31 May 19₹11,393
31 May 20₹12,311
31 May 21₹13,242
31 May 22₹13,634

ICICI Prudential Floating Interest Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹200,132.
Net Profit of ₹20,132
Invest Now

Returns for ICICI Prudential Floating Interest Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 24 Jun 22

DurationReturns
1 Month -0.6%
3 Month -0.3%
6 Month -0.1%
1 Year 1.7%
3 Year 5.8%
5 Year 6.2%
10 Year
15 Year
Since launch 7.6%
Historical performance (Yearly) on absolute basis
YearReturns
2021 3.8%
2020 9.5%
2019 8.4%
2018 6.6%
2017 6.8%
2016 8.9%
2015 8.1%
2014 9.2%
2013 9.2%
2012 9.7%
Fund Manager information for ICICI Prudential Floating Interest Fund
NameSinceTenure
Rahul Goswami27 Sep 129.68 Yr.
Nikhil Kabra3 Aug 165.83 Yr.

Data below for ICICI Prudential Floating Interest Fund as on 31 May 22

Asset Allocation
Asset ClassValue
Cash15.29%
Debt84.71%
Debt Sector Allocation
SectorValue
Government58.32%
Corporate26.23%
Cash Equivalent15.29%
Securitized0.16%
Credit Quality
RatingValue
AA15.62%
AAA84.38%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
5.53% Govt Stock 2033
Sovereign Bonds | -
38%₹6,000 Cr604,757,300
↑ 1,500,000
4.68% Govt Stock 2034
Sovereign Bonds | -
7%₹1,066 Cr109,696,560
4.93% Govt Stock 2028
Sovereign Bonds | -
6%₹1,035 Cr105,335,500
3.8% Govt Stock 2024
Sovereign Bonds | -
5%₹733 Cr74,000,000
Motherson Sumi Systems Limited
Debentures | -
2%₹298 Cr3,000
State Bank Of India
Debentures | -
2%₹253 Cr2,500
SRF Limited
Debentures | -
2%₹250 Cr2,500
6.54% Govt Stock 2032
Sovereign Bonds | -
1%₹220 Cr23,250,000
↓ -5,041,150
Godrej Industries Limited
Debentures | -
1%₹162 Cr1,650
Godrej Properties Limited
Debentures | -
1%₹150 Cr1,500

Advantages

Some of the benefits of Floating Rate Funds are:

  1. Price Stability- As floating rate funds are tied to current rates; the price of the underlying securities doesn’t fluctuate in response to changes in the interest rates.
  2. Better Yield- Floating funds tend to offer better yields than those of Certificate of Deposits (CDs). This can be a better idea for those who want to earn returns in a short duration.
  3. Moderate Risk- Debt funds are anytime less risky than Equity Funds. When it comes to floater funds these are less risky than other debt funds, as they don’t carry interest rate risk. However, diversification of the portfolio significantly reduces the risk of the portfolio.

Limitations

Floating rate funds may hold corporate bonds near to junk status or loans in danger of default. Although floating funds offer higher returns in a rising rate environment (because they move with rates), investors must assess the dangers of investing in the funds and investigate the fund holdings. Other short-term bond funds that invest solely in Treasuries exist, although they may have a fixed rate or a lower yield than floating rate funds. Before making a decision, investors must assess the risks and rewards of each investment.

How to Select Best Floating Rate Funds?

Some of the ideal ways to choose best floating rate funds are:

  • Look at the past performances of the fund, typically of past 1-3 years. The fund with the most stable and consistent performance is the one to go with
  • Ideally, one should go with the fund that has an Asset Under Management (AUM) > INR 100 Cr
  • Invest in funds that invests in high credit-rating companies
Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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