What are floating Rate funds

FLOATING RATE FUNDS

One of the basic features of debt schemes is that the value of the debt holdings will fall in value as the interest rates rise in the economy and they will rise when the rates fall. This makes investors in debt schemes susceptible to losses when conditions are adverse in the bond market. Floating rate funds are those schemes which invest their corpus into floating rate securities which means that the interest rate on these funds are reset at regular intervals. This makes them better positioned to tackle tough times in the debt market as their earnings and rates will change depending upon the resetting of the rates for the securities held. Again these schemes can be either short term or long term schemes.