Success and failure on the corporate bond fund market
We present the first broad overview of the factors determining corporate bond fund success and failure in terms of performance and survival. We show that the main determinant of survival is size. Performance matters only for small funds while large funds survive unconditionally, consistent with maintaining fee revenues. We neither find persistence in performance nor diseconomies of scale. This is due to advantages of larger funds in corporate bond trading. Other fund and family characteristics are unrelated to performance and survival, contrasting previous finings in equity funds. Thus, there are similarities but also important differences between the factors determining success and failure on the corporate bond and equity fund markets.
KeywordsCorporate bond funds Performance Disappearance and survival Fund size
JEL ClassificationG11 G12
We thank the Editor (Marielle de Jong), the anonymous reviewer, John Bilson, Martin Brown, Maik Dierkes, Mardi Dungey, Teodor Dyakov, Oliver Entrop, Monika Gehde-Trapp, Sebastian Bunnenberg, Richard Levich, Andrew Lynch, Steffen Meyer, Sebastian Müller, Klaus Röder, Daniel Ruf, Dominik Schulte, Carolyn Wang, the participants of the 2011 ATINER International Conference on Finance in Athens, the 2012 Campus for Finance in Vallendar, the 2012 MFA Meeting in New Orleans, the 2012 SWFA Conference in New Orleans, and the 2012 EFMA Symposium on Asset Management in Hamburg, the 2015 Annual Meeting of the German Finance Association in Leipzig and seminar participants at the University of Eichstätt-Ingolstadt, the University of Erlangen-Nürnberg, the University of Liechtenstein, the University of Tasmania, and the University of Hannover for very helpful comments and suggestions. We are responsible for any remaining errors.
- Berk, J. B., and I. Tonks. 2007. Return persistence and mutual fund flows in the worst performing mutual funds, NBER working paper series. http://www.nber.org/papers/w13042. Accessed 5 July 2018.
- Biswas, G., S. Nikolova, and C.W. Stahel. 2014. The transaction costs of trading corporate credit. Working paper. US Department of Treasury, University of Nebraska-Lincoln, SEC. http://ssrn.com/abstract_id=2532805. Accessed 5 July 2018.
- Evans, R.B., M. Rohleder, H. Tentesch, and M. Wilkens. 2018. Diseconomies of scale, Information processing and hierarchy costs: Evidence from asset management. Working paper. University of Virginia, University of Augsburg. https://ssrn.com/abstract_id=2933546. Accessed 5 July 2018.
- Fama, E.F., and J.D. MacBeth. 1973. Risk, return, and equilibrium: Empirical tests. Journal of Political Economy 81(3): 363–607.Google Scholar
- Natter, M., M. Rohleder, and M. Wilkens. 2018. Duration-adjusted bond fund performance. Working paper. University of Augsburg. https://ssrn.com/abstract_id=2877630. Accessed 5 July 2018.