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Home > Debt Schemes > Grindlays Floating Rate Fund - Long Term Plan

Introduction






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Introduction

Grindlays Floating Rate Fund - Long Term Plan

Investment Objective

The primary investment objective of the scheme is to generate stable returns with a low risk strategy by creating a portfolio that is substantially invested in good quality floating rate debt or money market instruments, fixed rate debt or money market instruments swapped for floating rate returns and fixed rate debt and money instruments.

Ideal investment horizon

The scheme is designed for investors who want to protect their returns over 1-2 years from a volatile interest rate environment.

Asset allocation pattern

The GFRF-LT will invest in

a)	Long and short floating rate bonds with coupon linked to diversified set of benchmarks (MIBOR, INBMK)

b)	Other long and short fixed rate debt securities converting to synthetic floating through swaps (relatively longer tenor OIS swaps and INBMK Swaps)

c)	Fixed-income debt securities and money market securities or instruments.

Type of Investment	Indicative Allocation	Risk Profile
Fixed Rate Debt Securities (including securitised debt & Money market instruments)	0%-35%	Low to medium
Floating rate debt instruments (including securitised debt & Money market instruments)	65%-100%	Low to medium

More on the Grindlays Floating Rate Fund- Long Term Plan

The objective of any floating rate fund is to represent the interest rate environment of the market. Thus if interest rates are rising, its returns should rise and vice-versa. Floating Rate Funds are protective products. Their rates are always in line with existing interest rates. They provide stable returns under all interest rate conditions. These funds do not invest in mark to market instruments and hence carry no interest rate risk.

	The yield Curve (relation of tenor and Yield to Maturity) is a function of Economic, Psychological and Technical factors.

	The yield curve is normally upward sloping which means the long term rates are higher than short term rates.

	Any change in the Economic, Psychological or Technical factors cause a change in the yield curve.

	These changes impact different parts of the yield curve differently which means that the shift in the yield curve is never parallel.

	Sometimes there is a change in the long-term rates and no change in the short-term rates, which leads to steepening of the yield curve.

	There can be times when the shocks just impact the shorter end of the yield curve.

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