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The performance of US bond mutual funds

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  • Clare, Andrew
  • O'Sullivan, Niall
  • Sherman, Meadhbh
  • Zhu, Sheng

Abstract

We evaluate the performance of the US bond mutual fund industry using a comprehensive sample of bond funds over a long time period from January 1998 to February 2017. In this one study, we examine bond fund selectivity, market timing and performance persistence. We evaluate bond funds relative to their self-declared benchmarks and in terms of both gross-of-fee returns and net-of-fee returns. We document considerable abnormal performance among funds both to the fund (gross returns) and to the investor (net returns). Bond fund performance is found to be superior in the post financial crisis period. However, past strong performance cannot be relied upon to predict future performance. Finally, while some funds exhibit market timing ability; we find a predominance of negative market timing among US bond mutual funds.

Suggested Citation

  • Clare, Andrew & O'Sullivan, Niall & Sherman, Meadhbh & Zhu, Sheng, 2019. "The performance of US bond mutual funds," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 1-8.
    • Handle: RePEc:eee:finana:v:61:y:2019:i:c:p:1-8
    DOI: 10.1016/j.irfa.2018.12.001
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    References listed on IDEAS

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    Cited by:

    1. Mayank Patel & Vinodh Madhavan & Supratim Gupta, 2022. "Selection ability, timing ability, and performance persistence of Indian fixed income mutual funds," Journal of Asset Management, Palgrave Macmillan, vol. 23(1), pages 46-61, February.
    2. Parise, Gianpaolo & Cutura, Jannic & Schrimpf, Paul, 2020. "Debt De-risking," CEPR Discussion Papers 14817, C.E.P.R. Discussion Papers.
    3. Galloppo, Giuseppe & Guida, Roberto & Paimanova, Viktoriia, 2024. "Mutual fund flows and returns dynamics: Investor preferences and performance persistence," Research in International Business and Finance, Elsevier, vol. 71(C).
    4. Zhang, Heming & Wang, Guanying, 2021. "Reversal effect and corporate bond pricing in China," Pacific-Basin Finance Journal, Elsevier, vol. 70(C).
    5. Otero-González, Luis & Leite, Paulo & Durán-Santomil, Pablo & Domingues, Renato, 2022. "Morningstar Star ratings and the performance, risk and flows of European bond mutual funds," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 479-496.
    6. Patel, Mayank & Madhavan, Vinodh & Gupta, Supratim Das & Kumar, Satish, 2023. "Performance persistence and style consistency of Indian fixed income mutual funds – A longitudinal study," International Review of Financial Analysis, Elsevier, vol. 86(C).
    7. Zhengnan Yin & Niall O’Sullivan & Meadhbh Sherman, 2024. "The market timing ability of bond mutual funds," Journal of Asset Management, Palgrave Macmillan, vol. 25(5), pages 508-527, September.
    8. Zhengnan Yin & Niall O’Sullivan & Meadhbh Sherman, 2024. "The performance of asset allocation mutual funds," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 38(4), pages 465-514, December.
    9. Nawazish Mirza & Jamila Abaidi Hasnaoui & Bushra Naqvi & Syed Kumail Abbas Rizvi, 2020. "The impact of human capital efficiency on Latin American mutual funds during Covid-19 outbreak," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-7, December.
    10. Clare, Andrew & Cuthbertson, Keith & Nitzsche, Dirk & O'Sullivan, Niall, 2021. "How skilful are US fixed-income fund managers?," International Review of Financial Analysis, Elsevier, vol. 74(C).
    11. Laleh Samarbakhsh & Meet Shah, 2021. "Fixed income mutual fund performance during and after a crisis: a Canadian case," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(4), pages 654-676, October.
    12. Jin, Liang & Taffler, Richard & Eshraghi, Arman & Tosun, Onur Kemal, 2020. "Fund manager conviction and investment performance," International Review of Financial Analysis, Elsevier, vol. 71(C).

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    More about this item

    Keywords

    Mutual funds; Bond funds; Benchmark returns; Market timing; Persistence;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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