Debt funds are mutual funds that invest in fixed income securities like bonds and treasury bills, money market instruments, corporate bonds, and Government securities. The main objective of investing in debt funds is to earn fixed income and capital appreciation.
A corporate bond fund invests in bonds issued by the companies. Any company can issue the corporate bond, also known as the non-convertible debentures. A corporate bond fund is an open-ended debt scheme in which the investor receives a fixed income from a safe source. 

Corporate bond funds invest at least 80% of its total assets in highest-rated corporate bonds usually with a maturity of 1-4 years. These funds are less volatile as corporate bond funds invest significantly in the debt of companies. There are two types of corporate bond funds. One type is high-rated companies, like public sector unit (PSU) and banks. The other one invests in slightly lower rating bonds, such as ‘AA-' and below.
Ultra short-term funds invest in fixed-income instruments which are mostly liquid and have short-term maturities ranging from 1 to 3 years. Short-term funds are ideal for conservative investors as these funds are not affected by interest rate movements. According to the recent definition by SEBI, ultra-short bond funds are open-ended debt schemes investing in instruments with maturity duration between three months and six months. Ultra short term duration funds are almost similar to liquid funds in terms of liquidity and returns.
Considering a period of 3 years corporate debt funds are riskier as there’s always the possibility of bond issuer defaulting on its obligations and volatility of interest. This default risk is higher for lower-rated securities and goes up exponentially with increasing maturities. The ultra-short-term debt funds are somewhat immune to interest rate risks because of the short maturity of their underlying assets.