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Top 4 Best Floating Rate Funds 2024 - Fincash

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Top 4 Best Floating Rate Funds 2024

Updated on June 17, 2024 , 18197 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 2024

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2023 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Aditya Birla Sun Life Floating Rate Fund - Long Term Growth ₹320.69
↑ 0.08
₹12,802247.667.57.71%11M 19D2Y 1M 13D
ICICI Prudential Floating Interest Fund Growth ₹391.259
↑ 0.16
₹9,7212.148.167.78.28%1Y 4M 13D6Y 8M 26D
Nippon India Floating Rate Fund Growth ₹41.3914
↑ 0.01
₹7,9561.93.97.35.67.27.8%2Y 7M 6D3Y 5M 5D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 19 Jun 24

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 7.9% since its launch.  Ranked 14 in Floating Rate category.  Return for 2023 was 7.5% , 2022 was 4.8% and 2021 was 3.6% .

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 (19 Jun 24) ₹320.69 ↑ 0.08   (0.03 %)
Net Assets (Cr) ₹12,802 on 31 May 24
Category Debt - Floating Rate
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk Moderately Low
Expense Ratio 0.45
Sharpe Ratio 1.47
Information Ratio 0
Alpha Ratio 0
Min Investment 1,000
Min SIP Investment 1,000
Exit Load NIL
Yield to Maturity 7.71%
Effective Maturity 2 Years 1 Month 13 Days
Modified Duration 11 Months 19 Days

Growth of 10,000 investment over the years.

DateValue
31 May 19₹10,000
31 May 20₹10,870
31 May 21₹11,539
31 May 22₹11,955
31 May 23₹12,755
31 May 24₹13,717

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 19 Jun 24

DurationReturns
1 Month 0.7%
3 Month 2%
6 Month 4%
1 Year 7.6%
3 Year 6%
5 Year 6.5%
10 Year
15 Year
Since launch 7.9%
Historical performance (Yearly) on absolute basis
YearReturns
2023 7.5%
2022 4.8%
2021 3.6%
2020 8.6%
2019 8.6%
2018 7.5%
2017 6.9%
2016 9.5%
2015 8.9%
2014 9.6%
Fund Manager information for Aditya Birla Sun Life Floating Rate Fund - Long Term
NameSinceTenure
Kaustubh Gupta20 Jun 149.87 Yr.
Harshil Suvarnkar22 Mar 213.11 Yr.
Dhaval Joshi21 Nov 221.44 Yr.

Data below for Aditya Birla Sun Life Floating Rate Fund - Long Term as on 31 May 24

Asset Allocation
Asset ClassValue
Cash18.34%
Debt81.4%
Other0.26%
Debt Sector Allocation
SectorValue
Corporate63.42%
Government26.58%
Cash Equivalent8.84%
Securitized0.9%
Credit Quality
RatingValue
AAA100%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
8.34% Govt Stock 2033
Sovereign Bonds | -
8%₹1,069 Cr105,000,000
LIC Housing Finance Ltd
Debentures | -
3%₹434 Cr4,500
National Bank For Agriculture And Rural Development
Debentures | -
3%₹396 Cr4,050
Hdb Financial Services Limited
Debentures | -
2%₹298 Cr30,000
Bajaj Housing Finance Ltd. 8.1%
Debentures | -
2%₹255 Cr25,500
↑ 25,500
Rural Electrification Corporation Limited
Debentures | -
2%₹224 Cr22,500
8% Govt Stock 2034
Sovereign Bonds | -
2%₹205 Cr20,500,000
ICICI Home Finance Limited
Debentures | -
2%₹200 Cr20,000
7.38% Govt Stock 2027
Sovereign Bonds | -
2%₹200 Cr19,820,900
State Bank Of India
Debentures | -
1%₹184 Cr1,900

2. 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 2023 was 7.7% , 2022 was 4.3% and 2021 was 3.8% .

Below is the key information for ICICI Prudential Floating Interest Fund

ICICI Prudential Floating Interest Fund
Growth
Launch Date 18 Nov 05
NAV (19 Jun 24) ₹391.259 ↑ 0.16   (0.04 %)
Net Assets (Cr) ₹9,721 on 31 May 24
Category Debt - Floating Rate
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk Moderate
Expense Ratio 1.29
Sharpe Ratio 1.08
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 100
Exit Load NIL
Yield to Maturity 8.28%
Effective Maturity 6 Years 8 Months 26 Days
Modified Duration 1 Year 4 Months 13 Days

Growth of 10,000 investment over the years.

DateValue
31 May 19₹10,000
31 May 20₹10,806
31 May 21₹11,623
31 May 22₹11,967
31 May 23₹12,801
31 May 24₹13,816

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 19 Jun 24

DurationReturns
1 Month 0.8%
3 Month 2.1%
6 Month 4%
1 Year 8.1%
3 Year 6%
5 Year 6.7%
10 Year
15 Year
Since launch 7.6%
Historical performance (Yearly) on absolute basis
YearReturns
2023 7.7%
2022 4.3%
2021 3.8%
2020 9.5%
2019 8.4%
2018 6.6%
2017 6.8%
2016 8.9%
2015 8.1%
2014 9.2%
Fund Manager information for ICICI Prudential Floating Interest Fund
NameSinceTenure
Rohan Maru12 Jun 230.89 Yr.
Darshil Dedhia12 Jun 230.89 Yr.

Data below for ICICI Prudential Floating Interest Fund as on 31 May 24

Asset Allocation
Asset ClassValue
Cash7.89%
Debt91.8%
Other0.31%
Debt Sector Allocation
SectorValue
Government59.49%
Corporate33.26%
Cash Equivalent6.87%
Securitized0.07%
Credit Quality
RatingValue
AA19.07%
AAA80.93%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
8.34% Govt Stock 2033
Sovereign Bonds | -
41%₹4,025 Cr395,238,780
8% Govt Stock 2034
Sovereign Bonds | -
10%₹974 Cr97,446,560
7.18% Govt Stock 2033
Sovereign Bonds | -
4%₹427 Cr42,410,330
↓ -22,500,000
LIC Housing Finance Limited
Debentures | -
4%₹364 Cr3,650
Muthoot Finance Limited
Debentures | -
3%₹250 Cr25,000
7.72% Govt Stock 2028
Sovereign Bonds | -
2%₹243 Cr24,273,598
Bharti Telecom Limited
Debentures | -
2%₹200 Cr20,000
Bharti Telecom Limited
Debentures | -
1%₹105 Cr1,050
Aditya Birla Finance Limited
Debentures | -
1%₹100 Cr1,000
360 One Prime Ltd.
Debentures | -
1%₹100 Cr10,000

3. 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 7.4% since its launch.  Ranked 32 in Floating Rate category.  Return for 2023 was 7.2% , 2022 was 3.8% and 2021 was 3.7% .

Below is the key information for Nippon India Floating Rate Fund

Nippon India Floating Rate Fund
Growth
Launch Date 27 Aug 04
NAV (19 Jun 24) ₹41.3914 ↑ 0.01   (0.03 %)
Net Assets (Cr) ₹7,956 on 31 May 24
Category Debt - Floating Rate
AMC Nippon Life Asset Management Ltd.
Rating
Risk Moderately Low
Expense Ratio 0.6
Sharpe Ratio 0.38
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 100
Exit Load 0-1 Months (0.5%),1 Months and above(NIL)
Yield to Maturity 7.8%
Effective Maturity 3 Years 5 Months 5 Days
Modified Duration 2 Years 7 Months 6 Days

Growth of 10,000 investment over the years.

DateValue
31 May 19₹10,000
31 May 20₹10,995
31 May 21₹11,837
31 May 22₹12,190
31 May 23₹12,972
31 May 24₹13,910

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 19 Jun 24

DurationReturns
1 Month 0.7%
3 Month 1.9%
6 Month 3.9%
1 Year 7.3%
3 Year 5.6%
5 Year 6.8%
10 Year
15 Year
Since launch 7.4%
Historical performance (Yearly) on absolute basis
YearReturns
2023 7.2%
2022 3.8%
2021 3.7%
2020 11.3%
2019 9%
2018 5.8%
2017 5.9%
2016 9%
2015 8.6%
2014 9.8%
Fund Manager information for Nippon India Floating Rate Fund
NameSinceTenure
Anju Chhajer1 Feb 204.25 Yr.
Kinjal Desai25 May 185.94 Yr.

Data below for Nippon India Floating Rate Fund as on 31 May 24

Asset Allocation
Asset ClassValue
Cash6.81%
Debt92.95%
Other0.24%
Debt Sector Allocation
SectorValue
Corporate62.58%
Government33.04%
Cash Equivalent4.15%
Credit Quality
RatingValue
AAA100%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.72% Govt Stock 2028
Sovereign Bonds | -
7%₹595 Cr59,500,000
HDB Financial Services 8.04%
Debentures | -
4%₹348 Cr3,500
Small Industries Development Bank Of India
Debentures | -
4%₹325 Cr32,500
8% Govt Stock 2034
Sovereign Bonds | -
4%₹305 Cr30,500,000
Tata Capital Housing Finance Limited
Debentures | -
4%₹299 Cr3,000
Jamnagar Utilities & Power Private Limited
Debentures | -
3%₹271 Cr2,800
Indian Railway Finance Corporation Limited
Debentures | -
3%₹251 Cr25,000
Rural Electrification Corporation Limited
Debentures | -
3%₹251 Cr25,000
Bajaj Housing Finance Limited
Debentures | -
3%₹240 Cr2,400
National Bank For Agriculture And Rural Development
Debentures | -
3%₹210 Cr21,000

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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