DSP Floater Fund NFO
DSP Mutual Fund has announced the launch of the DSP Floater Fund. The scheme would be investing its assets in floating rate instruments.
The New Fund Offer (NFO) starts on 04th March 2021 and will end on 17th March 2021. The fund will reopen for continuous sale and repurchase within 5 business days of allotment. The date of allotment is 22nd March 2021.
The investment objective of the scheme is to generate regular income by investing its assets in floating rate & fixed income debt instruments including money market instruments.
- The Fund will be investing a minimum of 65% of its assets in floating rate debt instruments.
- It will invest in Sovereign securities issued by state & central government and Overnight Index Swaps (OIS).
- The fund aims to give exposure to fixed-rate instruments which are converted into floating rate exposures using derivatives or swaps.
- The fund may invest up to 35% of assets in Money Market Instruments and Fixed-rate debt instruments.
How is the portfolio constructed?
The fund aims to create a portfolio with a combination of:
- Sovereign securities: The fund will buy SDLs/G-secs with maturity between 2-6 years. It will follow a roll-down strategy in sovereign positions with a buy & hold approach.
- OIS: The fund will have paid positions in OIS(Overnight Index Swaps) with a tenure ranging from 1 month to 3 years.
The starting point of portfolio construction will be decided by the spreads between these 2 segments.
Why invest in DSP Floater Fund?
- Navigating Rate Cycle: The fund has the potential to gain from the falling interest rate scenarios and has the enabler to shield portfolio returns in case of reversals.
- Relatively Stable Returns: The fund presents a one-stop investment destination to investors where they would not need to worry about changes in interest rate cycles.
- No Credit Risk: The fund will not have associated credit risks as it invests only in sovereign securities like Government Securities or State Development Loans (SDL).
- Accrual & Capital Gain: The fund aims to generate periodic accrual from sovereign positions and capital gains through exposures in sovereign & paid OIS(Overnight Index Swap) positions.
- Active & passive management: The fund will have active management in paid OIS positions along with the roll-down strategy in G-secs and SDLs.This way, it will offer the benefit of both active & passive management.
- Differentiated offering: The fund is one of a kind product in the short-term category i.e with a duration range b/w 1 to 4 years through its offering of an interest rate hedge using its positions in paid OIS.
DSP Floater Fund - Risk Management
- Interest Rate Risk: To reduce the interest rate risks, the fund will have roll-down exposures to government securities and paid OIS positions having an implied starting point of maturity around 2 years. Also, the fund has an enabler that aims to offset MTM(Mark to Market) losses from G-secs during rising interest rate scenarios from MTM gains in paid OIS positions.
- Credit Risk: The fund will not have the credit risks as it will invest only in sovereign securities.
- Liquidity Risk: It will not have liquidity risks as it only invests its assets in the most liquid segments of the fixed income market like G-secs and OIS.
- Volatility: Fund may have volatility phases especially in the case of widening spreads between G-secs and OIS. But, a higher fiscal deficit & higher Government borrowing will advance the prospects of liquidity normalization & rate reversal which may lead to compression of spreads.
Who Should Invest?
This scheme is suitable for investors who are -
- Interested in regular income.
- Interested in investments in floating rate debt instruments.
- Interested in investments in fixed-rate instruments which will be converted to floating rate exposures.
- Recommended for investors with a minimum investment horizon of 1 year.
Asset Allocation Pattern
|Instruments||Minimum % of total assets (Indicative)||Maximum % of total assets (Indicative)||Risk Profile|
|Floating rate debt instruments including fixed-rate instruments which are converted into floating rate exposures using derivatives or swap||65%||100%||Low to Moderate|
|Money Market Instruments and Fixed-rate debt instruments||0%||35%||Low to Moderate|
About the Scheme
|Name of the fund||DSP Floater Fund|
|Fund launched by||DSP Mutual Fund|
|Asset Management Company||DSP Investment Managers Private Limited|
|Type of scheme||An open-ended debt scheme investing in floating-rate instruments including the fixed-rate instruments which will be converted into floating-rate exposures using derivatives or swaps.|
|Investment Objective||The investment objective of the scheme is to generate regular income by investing its assets in floating & fixed-rate instruments.|
|Benchmark||CRISIL Short Term Gilt Index|
|Entry Load||Not Applicable|
|Exit Load||Not Applicable|
|Minimum Application Amount||₹ 500 & any amount thereafter|
|STP, & SWP||Available|
|Fund Managers||Mr. Saurabh Bhatia|
|Type||Minimum Installments||Minimum Amount|
|Monthly SIP||12||₹ 500 & any amount thereafter|
|Quarterly SIP||12||₹ 500 & any amount thereafter|