DEBT FUNDS

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What is a Debt Fund ?

A debt fund is an investment pool, such as a mutual fund or exchange-traded fund, in which the core holdings comprise fixed income investments.

A debt fund may invest in short-term or long-term bonds, securitized products, money market instruments or floating rate debt. On average, the fee ratios on debt funds are lower than those attached to equity funds because the overall management costs are lower.

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Often referred to as credit funds or fixed income funds, debt funds fall under the fixed income asset category. These low-risk vehicles are customarily sought by investors looking to preserve capital and/or achieve low-risk income distributions.

Key Takeaways


  • A debt fund refers to a mutual fund, an exchange-traded fund (ETF), or any other pooled investment offerings whose underlying investments chiefly contain fixed income investments.

  • Fees on debt funds are lower than those associated with equity funds because their management costs are inherently lower.

  • Investors interested in debt fund options can choose between passive and active products.