Bond mutual funds and complex investments

Markus Natter (), Martin Rohleder (), Dominik Schulte () and Marco Wilkens ()
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Markus Natter: University of Augsburg
Martin Rohleder: University of Augsburg
Dominik Schulte: Tecta Invest GmbH
Marco Wilkens: University of Augsburg

Journal of Asset Management, 2017, vol. 18, issue 6, No 2, 433-456

Abstract: Abstract We are the first to analyze bond mutual funds’ permission and use of complex investments such as derivatives, restricted securities, and securities lending. Based on unique regulatory information from the SEC’s N-SAR filings, we show that most complex investments do not affect fund performance or risk. However, interest rate futures (IRF) are harmful to bond funds. Bond funds engaging in IRF (46.94% of all bond funds) underperform nonusers by economically meaningful 54 basis point of alpha p.a. Our results reveal that bond funds employ IRF for speculation as they increase funds’ exposure toward interest rate risk.

Keywords: mutual fund performance; bond funds; performance; derivatives; interest rate futures (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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DOI: 10.1057/s41260-017-0046-7

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