Tipping Point: Should you shift to longer duration funds?

Investors should be cautious as there isn't a clear outlook on interest rates now.

Despite the Infrastructure Leasing and Financial Services defaults, debt funds have given decent returns in the last calendar year. Both short-term and long-term funds have returned between 5 per cent and 6 per cent. What is interesting is that in the last three months, returns from long-term funds have suddenly shot up to 7 per cent. Experts say that fund managers are taking duration risks aggressively now. Investors should, however, be cautious as there isn't a clear outlook on interest rates now.