For investors and fund managers of most debt funds, last week's events were a bit of a shock. Moreover, this shock was entirely self-inflicted and results from the flawed approach that fund companies have towards debt fund investing. In these supposedly stable fund categories, all debt funds made large losses on Feb 8, the day the RBI Governor announced that the central bank's monetary policy committee had decided to hold interest rates. Some funds lost up to 2.6 per cent, which is what they would otherwise expect to earn in 2-3 months. Except for liquid funds, which are constrained by Sebi rules to invest in very short-term debt, every type of fund lost money .These funds will not be able to make up this one day's losses and their investors will be denied the kind of stable returns they expect from debt funds.