The second main strategy that debt funds follow is duration. In this article, we’ll cover what a duration strategy in debt funds is, which categories follow duration, and whether you should invest in such funds.
If the recent events in the debt space brought to light the liquidity risk arising from lower rated papers, you probably haven’t seen the unfolding of various kinds of risk since September 2018. In 2013, when duration became a risk on the back of rate hikes, money flowed copiously to credit risk over the next 5 years. Now, the cycle has turned. Money is moving to duration from credit risk.