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ICICI Prudential Savings Fund
By ICICI Prudential Mutual Fund
Monday, April 14, 2014
     

There are many factors that determine the rate of interest of securities, and constant changes in these underlying fundamentals, cause fluctuations in the interest rates, which has a direct impact on the value of our portfolio. An increase in rates reduces the value of our holdings and vice-versa.

If interest rates on instruments in the portfolio were to keep getting reset according to the prevailing market rates, then, we may be able to focus on the interest income without worrying too much about its impact on the portfolio.

ICICI Prudential Floating Rate Plan, an open-ended income fund, focuses primarily on dynamic interest rates, and takes rapid action when necessary to minimize the impact of these fluctuations on your portfolio.

Investment Philosophy

This debt fund invests predominantly in debt securities with a floating rate of interest. It focuses on floating rate instruments in the portfolio which are benchmarked to short-term benchmarks' like the MIBOR, to ensure rapid response to changes in interest rates. This also ensures that the portfolio has limited interest rate risk. The portfolio also invests in fixed rate securities, but spreads out its investments such that parts of the portfolio mature regularly, enabling redeployment at newer rates. It also uses the interest rate swap market, to swap fixed rates for floating rates. During times of an increase in interest rates, the Plan enables focus on the interest income, rather than losses in portfolio value.

Key Benefits

A portfolio that focuses on accrual income, which is derived from floating rate instruments.
Reduced interest rate risk of longer term instruments.

This product is suitable for investors who are seeking:

Short term savings solution
A Debt Fund that invests in debt and money market instruments of various maturities with an aim to maximise income while maintaining an optimum balance of yield, safety and liquidity.
Low risk