This fund has delivered above average return with low risk, making it an ideal investment option for those wary of the debt market's volatility. In nearly one-year of its existence, Birla Floating Rate Short-term fund has delivered 4.76 per cent return, which is better than the category average return of 4.65 per cent.
The fund takes lower interest rate-risk by keeping half of its portfolio investments in floating rate instruments (Mibor-linked). Though its average maturity has moved in a broad range of 5-19 months, the fund has managed to keep its volatility in check. The fund's average monthly return stands at 0.39 per cent – higher than the category average return of 0.37 per cent.
It has also taken lower credit risk by largely sticking to short-term P1+ rated securities and AAA-rated bonds. However, for a short period – April and May 2004 – it invested over 30 per cent into mid-quality bonds, but since then the exposure to these bonds have come down to 20 per cent.
This fund has a lot going for it, including a reasonable expense ratio of 0.84 per cent – in line with the category average. Thus, investors wanting to negate the debt market volatility should look forward to Birla Floating Rate Fund.