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ABC of Fixed Income Investing : Recommended Floating Rate Funds
June 24, 2011

Series on basics of investing in fixed income funds-Part IX


Author : Niketa Agarwal



 ABC of Fixed Income Investing : Recommended Floating Rate Funds

Retail investors in India can be said to be reasonably well informed when it comes to investments in equities, real estate or even assets like gold or silver. The Fixed Income asset class, however, is not so well known. As a tool for diversification, and as a safe avenue for volatile times, understanding this class is important. Even experts agree that greater retail participation in the fixed income market in India will make it more robust.

Fundsupermart.com has always tried to draw notice to this asset class through various research and personal finance articles on the website. Taking this initiative further, we bring to you this series explaining basics of fixed income investments!

I. Recommended Funds in Fixed Income

Recommended Ultra Short Term Funds>>

Recommended Short Term Funds>>

Recommended Floating Rate Funds>>

These funds follow the investment objective of providing regular income to the investors against interest rate fluctuations. The funds invest a portion of its assets in floating rate papers and money market instruments and seek to minimise risks and act as a hedge against interest rate fluctuations.
Our recommended funds in this category include:

  • BSL Floating Rate Fund Long Term Plan- Dividend**
  • Canara Robeco Floating Rate Short Term Plan- Dividend**

Information on the Fund:

Fund Information

BSL Floating Rate Fund Long Term Plan
(as at June 2011)

Canara Robeco Floating Rate Short Term Plan
(as at May 2011)

Modified Duration

0.06

0.04

Expense Ratio

_

_

AUM 

_

INR 234.81 crores

Exit Load

0.25% (within 30 days of allotment)

0.25% (within 15 days of allotment)

 Average Maturity of the Funds:

Average Maturity (In Months)

BSL Floating Rate Fund Long Term Plan

Canara Robeco Floating Rate Short Term Plan

3 Months

1.68

1.40

6 Months

1.56

1.34

1 Year

2.29

1.42

3 Years

4.06

1.65

Since Inception

3.63

2.21

 The table above shows the average maturity of the different funds. Low average maturity indicates that a bond is least volatile to interest rate fluctuations and vice versa. Using the table above, an investor can see the average maturities of the three funds on our platform and then compare their returns with the risk associated with them.

**The Dividend option for all investors belonging to retail and HUF category have the applicable tax rate as only 13.841%. So, debt funds are tax efficient for individuals who fall in higher tax brackets of 20% and 30%.  The investor can also invest into monthly or fortnightly dividend scheme. Also, redemption should be done after the declaration of the dividend for the month / fortnight. This way the investor avoids paying short term capital gains tax.

BSL Floating Rate Fund Long Term Plan

Fund Performance

The graph here compares the percentage returns of BSL Floating Rate Fund Long Term Plan- Growth with the percentage returns of its benchmark, Crisil Liquid Fund Index at definite periods of time.

From the graph it can be easily seen that the fund has managed to outperform its benchmark returns at all periods.

BSL FRF Portfolio Composition and Credit Rating

The graph here show the portfolio composition of the fund. It also shows the current credit rating of the various instruments which comprise the portfolio.

In this case 100% of the portfolio is invested in CDs with the best rating of (PR+).Source: Ace MF

 

Canara Robeco Floating Rate Short Term Plan

Fund Performance

The graph here compares the percentage returns Canara Robeco Floating Rate Short Term Plan- Growth with the percentage returns of its benchmark- Crisil Liquid Fund Index at definite periods of time.

From the graph it can be easily seen that the fund has managed to outperform its benchmark returns at all periods.

Canara Robeco FRST Portfolio Composition and Credit Rating

The graph here show the portfolio composition of the fund.

It also shows the current credit rating of the various instruments which comprise the portfolio. .Source: Ace MF

We would continue with the series. Watch this space for more...


Disclaimer: iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's scheme information document including statement of additional information. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer on the website.Please read our disclaimer in the website. Risk Factors: Mutual funds, like securities investments, are subject to market risks and there is no guarantee against loss in the Scheme or that the Scheme’s objectives will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on various factors and forces affecting capital markets. Past performance of the Sponsor/the AMC/the Mutual Fund does not indicate the future performance of the Scheme. The name of the Scheme does not in any manner indicate the quality of the Scheme, its future prospects or returns. Please read the Statement of Additional Information and Scheme Information Document carefully before investing.



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