In the midst of turmoil in the debt funds space these past two years, short-term debt funds have been getting consistent inflows. These funds invest in shorter tenure bonds in a manner that their portfolio's Macaulay Duration (MD) remains between one and three years. They do not have any restriction in terms of the credit ratings of instruments that they invest in. But most choose to invest in highly-rated assets. These funds are less sensitive to change in interest rates that long-term and government securities funds. Short duration funds are attractive for investors with a three year investment timeframe.