Launch of Tata floating rate fund announced by Tata Mutual Funds

The launch of the Tata floating rate fund has been announced by Tata mutual funds.  The New Fund Offer (NFO) will run from 21st June to 5th July for the scheme. Anyone willing can invest in it thereafter as it is an open-ended scheme. Through a portfolio comprising substantially of floating rate debt, fixed-rate debt instruments which will be swapped for floating rate returns along with money market instruments, the fund shall endeavour to generate relatively stable returns.

Issued by corporates or the government or convert fixed interest securities to floating through derivatives, the fund thereby aims to invest a minimum of 65 per cent of its corpus in floating-rate securities. Along with gaining from rising interest rates, the floating rate funds are relatively less affected by such rates.

As and when required, the Reserve Bank of India might address liquidity and rate corridor first, thereby following up with rate movement and might most likely contribute to reducing the access accommodation, as said by senior fund manager at Tata Asset Management, Akhil Mittal. Any sort of normalization will start only after 6 to 9 months along with a stay-put by RBI on the current accommodation for this financial year, he added.

Through changing allocations to debt instruments, the floating-rate fund also gives the flexibility to not only manage interest rate risks but also provides another tool in the form of swaps to manage duration and at the same time choose the optimal mix, according to a release issued by Tata Mutual Fund.

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