DSP Investment Managers has launched a Floater Fund, an open ended debt scheme predominantly investing in sovereign bonds and overnight index swaps to help investors better navigate interest rate cycles.

The NFO will close on March 17.

DSP Floater Fund is a one of its kind product in the 1-4 year category with interest rate hedge using paid position in OIS (overnight index swap). The scheme aims to offer relatively stable returns for investors without worrying about changes in interest rate cycles.

It will allocate a minimum of 65 per cent and a maximum of 100 per cent 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 per cent in fixed rate debt securities including money market instruments.

The Scheme has elements of active and passive fund management. It is suitable for investors who seek a low risk alternative to fixed deposits with a minimum holding period of over one year and prefer portfolios with no credit risk and high liquidity.

Kalpen Parekh, President, DSP Investment Managers said the fund house launched roll down Corporate Bond Fund when rates were high at nine per cent in 2018.

As the interest rate cycle shows signs of reversal, it was a good time to introduce a roll down sovereign (short term) fund with hedge against the interest rate risk. The attempt is to capture the term spread at 5 years but minimise volatility if interest rates rise, he said.

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