Medium duration debt funds pick bonds that ensure the Mecaulay duration of the portfolio is between four and seven years. Fund managers can even pick low rated bonds since there is no restriction on the credit rating of the bond.
In a rising interest-rate environment, these schemes came under pressure due to the marked to market losses on the bonds held. They saw outflows. However, as the rate hike cycle may be nearing its peak, savvy investors may rush to lock in yields. Invest in them only if your holding period matches with the duration of the scheme and you are comfortable with the credit quality of the bonds held.