Long duration funds or long-term bond funds are debt funds that invest in long-term fixed income instruments. As per Sebi mandate, long duration funds must invest in debt and money market instruments with a Macaulay duration of more than seven years. This investment mandate makes them suitable only for long-term investments.
However, most mutual fund advisors do not recommend these schemes to regular debt mutual fund investors because these funds are extremely sensitive to interest rate movements. They can lose heavily when the interest rates harden or stay put. Similarly, they benefit the most when the rates start falling.
