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Mutual Funds - Floating rate funds

Floating rate funds invest largely in floating rate securities and, therefore, are better equipped to mitigate the risk of volatile interest rates.

With all the talk of an imminent interest rate hike, shortterm floating rate funds can be a good investment option.

Although he would not advise investors to make short-term investment decisions in a situation where interest rates look set to go up, floating rate funds are a good option.

Floating rate funds would do well in a rising interest rate regime. Also, hybrid funds, which have an exposure to floating-rate instruments and have shorter duration, will benefit from rising interest rates.

At present, the annual average return on short-term floating funds is 4.45 per cent compared with 2.96 per cent return on short-term gilt funds.


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