Axis Floater Fund: A Good Debt Fund Option For Those Looking To Park A Short-Term Surplus


oi-Roshni Agarwal


The NFO is the most suitable way to apply for the newly launched mutual fund and is similar to an IPO of a company moving to Indian stock exchanges. Usually, for the NFO, the offer price is set at Rs. 10 while after the period expires, investors should request the mutual fund at the net asset value of the fund.

Now, before we get into the specific details of this new Axis Floating Fund, let’s understand what the Floating Fund is.

Axis Floater Fund: A Good Debt Fund Option For Those Looking To Park A Short-Term Surplus

Floating funds:

Floating funds are generally debt funds with a mandate to invest 65% of their corpus in variable rate bonds. The interest rate on these bonds changes with the interest rates in the economy. These bonds are generally suitable for investors looking for securities or investment options that do not erode their principal capital. Fixed rate bond prices have an inverse relationship to changes in interest rates – as interest rates rise, bond prices fall and vice versa.

How do floating funds generate returns for investors?

Floating funds with their corpus of fluctuating interest bearing debt securities do not play with investors’ capital, but rather provide a return based on the floating bond rate. So, as the RBI changes its key rate, it may get a lower or higher rate accordingly.

This floating fund was unveiled at a time when

1. The economy is recovering from the second wave of Covid at a relatively better rate:

• It is signaled a pick-up in the high frequency data
• Repressed demand restores normality on the demand front in the country.
• The GDP figures for the fourth quarter of fiscal 21 also highlight attributes of latent growth as a direct effect after the first wave. The same attributes should appear in the GDP figures for the first quarter of FY22. And with the restrictions lifted, we are on the cusp of a new business cycle.

2. At the bottom of the interest rate cycle:

With inflation rising, the center no longer has the option of lowering rates further, and in all likelihood, rates will only move north. Even then, the liquidity of the system still remains high.

3. Yields started to increase where they were hit the most:

On all government securities (G securities) and credit curves, we observe a normalization of the yield curve and the rise is more pronounced where the rates have been lowered the most. This is to some extent facilitated by the various intervention measures of RBI.

The Axis NFO floating fund and its various functionalities:

The Axis NFO floating fund and its various functions:

The Axis Floater fund is a variable capital system investing primarily in variable rate securities.

1. Floating rate funds

2. The fund manager is Mr. Aditya Pagaria

3. NFO opens July 12, 2021

4. The minimum application is Rs. 5000 and in multiples of Rs. 1 thereafter

5. Main investments: These funds invest in floating rate bonds and because these floating rate bonds periodically adjust to the market interest rate, the prices of these bonds do not follow the same price / yield relationship. There will be no allocation to instruments rated “A” or less.

6. Investment horizon: The fund targets an average maturity of between 6 and 18 months and is therefore a good bet for those looking to park their short-term surpluses. It aims for an average maturity of the portfolio of 6 to 18 months. At least 12-18 months.

Where will the Axis Floating Fund invest?

Where will the Axis Floating Fund invest?

Invest primarily in floating rate instruments (including fixed rate instruments converted into floating rate exposures using swaps / derivatives). Thus, the fund will mainly seek 80% AAA / A1 securities as well as a 20% allocation to AA issuers.

Who should invest in Axis Floater funds?

Who should invest in Axis Floater funds?

Investors who do not want their capital / investment to be impacted and seek to reduce their risk can diversify their portfolio by allocating a portion in floating funds to obtain a good short term return. Axis Floating Bonds, in particular, offer a market-linked return and are ideal for those looking to hedge interest rate risk in a rising rate environment.

The fund may also convert a fixed rate bond exposure to a market linked floating rate exposure, thereby reducing any interest rate risk associated with the fixed rate instrument. This can be explained according to the example illustrated in the NFO prospectus:

Say: Fund says a fixed rate bond with a 5.25% coupon. Then the fund also contracts an investment bank to swap the bond for a floating structure and the counterparty agrees to provide a MIBOR + 3% payment structure for the exchange in exchange for the bond’s fixed coupon.

It should be noted that the rise in rates of return will be more marked for the 3 to 5 year segments because these mandates underwent the greatest compression during the previous cycle. Thus, a gradual rise in rates is looming in the medium term.

Return and other advantages of the Axis Floating Fund

Return and other advantages of the Axis Floating Fund

– The Fund’s investment in AA issuers currently offers a return equivalent to that of longer maturity AAA papers.

– Government support for the credit market makes the risk / reward ratio better and more attractive, as the fundamental macroeconomic factors reflect a strong recovery.

– The device can also be invested for STP in equity funds.

– Consequently, investors will have the possibility of obtaining a better risk / return option compared to traditional short-term investments.



Past performance may or may not be sustained in the future. The Sector (s) / Share (s) / Issuer (s) mentioned above are for disclosure purposes of the Scheme (s) portfolio and should not be construed as a recommendation. . The fund manager (s) may or may not choose to own the mentioned stocks from time to time. Investors are urged to consult their financial, tax and other advisers before making any investment decision.

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