Axis Floater Fund NFO: Dealing with higher interest rate environment

Targets 80% allocation to AAA/A1, along with 20% allocation to AA issuers; minimum investment horizon of 12 – 18 months

Staff Writer   /   July 10, 2021

Axis Mutual Fund has announced the launch of their new fund offer – ‘Axis Floater Fund’. The fund offers efficient solutions for short term investors looking to navigate a possible rising interest rate environment and also an ideal parking solution for their investment. The fund will be actively managed by Aditya Pagaria, Fund Manager – Fixed Income. Read on to know more details of the NFO that will open on July 12.

Fund concept

Axis Floater Fund aims to be a well-crafted portfolio with an efficient way to park money. The new fund offer will have a dynamic mix of high-quality instruments & AA issuers. It targets a portfolio average maturity of 6-18 months. This makes it suitable for investors looking to park short-term surplus funds or for those looking to limit the interest rate risks in their debt portfolio.

The fund will attempt to offer better risk reward opportunities over other traditional alternatives in the short term space.

Axis Floater Fund is an actively managed portfolio of floating rate instruments and fixed rate bonds that are swapped for floating rate characteristics through swaps. The floating rate strategies aim to manage interest rate risks by investing in bonds where the coupon is linked to market movements.

The scheme will target 80% AAA/A1 + along with 20% allocation to AA issuers to capture opportunities across the debt market.

Why now

Interest rates are at pivotal junction. With improving macro-economic fundamentals and a strong global economic sentiment, India is poised to gradual get back to becoming one of the fastest growing large economies of the world. As inflation edges higher, we believe that we are at the bottom of the interest rate cycle. As the RBI looks to roll back accommodative momentary policy markets have prompted RBI actions and priced yield curves higher. Historically, such events, have led to a sharp and swift rise in short term rates as seen in the 2008-2011 and 2012-14 interest rate reversals, sys Axis MF.

For investors looking at short to medium term debt investment solutions, floating rate strategies make for an ideal solution to earn market linked inflation beating returns as well as to navigate a rising interest rate scenario. Hence, Axis Floater Fund could be a compelling choice.

Fund-house speak

Announcing the launch of the NFO, Chandresh Nigam, MD & CEO, Axis AMC, said “At Axis AMC, we have always believed in being ahead of time and introducing a product bouquet which gives our investors promising avenues for wealth creation. Every investor holds different goals, risk appetite and a different time horizon to achieve the set goals. Therefore, we aim at personalising and intelligently crafting multiple investment options to fulfil the needs of our investors.”

“The economic fundamentals are improving gradually and returning to normalcy. These are early signs of a pickup in demand and we believe we are the cusp of a new growth cycle. The country is also likely at the bottom of the interest rate cycle and we expect rates to see a gradual rate hike cycle in the medium term. With the launch of this fund, we believe that we will provide an efficient solution for short-term investors looking to navigate a possible rising rate environment.”

Summary

Axis MF believes we are at the cusp of a new growth cycle as well as at the bottom of the interest rate cycle.

Markets tend to price changing economic conditions and policy actions swiftly.

Floating rate strategies aim to manage interest rate risks by investing in bonds where the coupon is linked to market movements.

If you feel uncomfortable about investing in Axis Floater Fund due to it being a new fund, you can look at existing funds such as HDFC Floating Rate Debt, ABSL Floating Rate, Nippon India Floating Rate, ICICI Pru Floating Interest and Kotak Floating Rate.

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