Introduction to floating rate funds with Arvind Subramanian

Interest rates in India are at multi-decade lows given the severe macroeconomic shocks due to COVID. We seem to be recovering slowly and the consensus view seems to be that the rate cut cycle is over and we may soon enter a rate hike cycle, which means this is a negative for debt investors.

Given this reality, there has been an increasing discussion around floating rate funds. These funds are different from other bond funds and tend to do well in a rising rate environment. But this a very small category and isn’t very popular among investors. There also seem a lot of misconceptions of how these funds work and how they should be used in a portfolio.

The guys at IDFC mutual fund are coming up with an NFO for their floating rate fund and we decided to catch up with Arvind Subramanian to talk in-depth about what floating rate funds are how they work and how you should think about them from a portfolio perspective. Arvind has an experience of over a decade in the mutual fund industry. Prior to IDFC AMC, he worked as a Senior Analyst at ICRA Limited - Investment Information and Credit Rating Agency.