Debt funds are a type of pooled investment options that consists predominantly of fixed income investments. They can either be a mutual fund or an Exchange Traded Fund (ETF). The fees associated with debt funds are generally lower than those of equity funds, due to their lower management costs.

Debt funds are an ideal investment option for investors who are looking to generate a steady income from their investments. They are also suitable for those investors who have lower risk appetites, as debt funds typically provide lower but more secure returns than equity funds.

The primary advantage of investing in debt funds is the high degree of liquidity they provide. This allows investors to get their money out quickly in the event of a need for cash. As compared to other fixed income investments, such as bonds and Certificate of Deposits (CDs), debt funds provide a higher degree of liquidity.

Debt funds are broadly classified into passive and active products. Passive debt funds are those that follow an index or benchmark such as a government bond. Active debt funds are those that are managed by an experienced fund manager to earn higher returns. Active debt funds can either be actively managed by the fund manager or passively managed, using quantitative strategies.

Overall, debt funds provide investors with an excellent option to invest in fixed income investments. With their relatively low risk and higher degree of liquidity, debt funds can be leveraged in order to achieve accurate portfolio diversification and to offset volatility and risk in the markets.