Prajna Capital - An Investment Guide

Floating-rate funds are debt funds though they are less affected by the interest-rate fluctuations than the fixed-rate funds. This is because of the underlying investment of these funds. Floating-rate funds invest predominantly (65-100 per cent) in floating-rate instruments. The interest-rate on these instruments is readjusted periodically according to the existing market interest-rate hence reducing the interest-risk considerably. Thus in the prevailing market situation, floating-rate funds are a better option, considering the unpredictable interest-rate movements.