MUMBAI: DSP Investment Managers Private Limited announced the launch of DSP Floater Fund (the scheme), an open-ended debt scheme predominantly investing in sovereign bonds and overnight index swaps (OIS) to help investors better navigate interest rate cycles. The NFO is scheduled to open on March 04, 2021, and will close on March 17, 2021.
DSP Floater Fund is its kind product in the short-term category (duration band of 1 to 4 years) with interest rate hedge using paid position in OIS. The Scheme aims to offer relatively stable returns for investors without worrying about changes in interest rate cycles. The Scheme aims to navigate interest rate cycles in an optimal manner, having the potential to gain from a fall in interest rates as well as aiming to shield portfolio returns in times of reversal of the interest rate cycle.
The Scheme will allocate a minimum of 65% and a maximum of 100% in floating rate debt securities and have exposure mainly in Sovereign Securities issued by state and central government and OIS for creating synthetic floating-rate exposure. The Scheme also proposes to invest up to 35% in fixed-rate debt securities including money market instruments.
The Scheme has elements of active and passive fund management, having active management in paid OIS position with the passive roll down strategy in Government Securities and State Development Loans. The Scheme is suitable for investors who seek a low-risk alternative to fixed deposits with a minimum holding period of over 1 year and prefer portfolios with no credit risk and high liquidity.
“Roll down funds have been a preferred choice for many investors in the 3 years. DSP launched its own roll-down fund – Corporate Bond Fund when rates were high (9%) in 2018. As the interest rate cycle shows signs of reversal, we felt it is a good time to introduce a roll-down sovereign (short-term) fund with OIS that helps hedge against the interest rate risk. The attempt is to capture the term spread at 5 years but minimize volatility if interest rates rise, says Kalpen Parekh, President, DSP Investment Managers.
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