Abstract
Growing acceptance of passive bond exchange traded funds (ETFs) and actively managed bond mutual funds has exposed the need to find a divide between these two comparatively similar types of instrument. This paper provides a comparative analysis of actively managed bond funds and passive bond ETFs in the context of multiple criteria. The research of risk-adjusted performance of a sampled group of bond funds and ETFs using the TOPSIS multi-criteria decision-making method revealed that actively managed bond funds have a modest advantage over passive bond ETFs. Moreover, the final findings indicate the funds’ performance dependability on portfolio composition by fixed income sector.
Highlights
Stable investment performance and ability to manage risks are the key areas for every investor.Nowadays, financial markets are able to suggest various ways to achieve this
The author highlights that, generally, bond mutual funds are exposed to higher expense ratio and management fees, but at the same time, they are more flexible in comparison with exchange traded funds (ETFs) due to the possibility of investing and repositioning its holdings when required
The analysis revealed that there is a wide list of scientific studies that combine various indicators to evaluate the fund‘s performance (Agarwal and Mirza 2017; Bhagyasree and Kishori 2016; Ayaluru 2016; Adhav and Chauhan 2015; Jahnavi and Bose 2016; Rani and Hooda 2017)
Summary
Stable investment performance and ability to manage risks are the key areas for every investor. Growing acceptance of bond ETFs and mutual funds has exposed the need to find a divide between these two comparatively similar types of instrument. Bond ETFs are usually passively managed instruments meaning that the fund’s strategy is designed to match the performance of a particular index, not to produce higher returns. There is no recent scientific evidence that actively managed bond mutual funds produce better risk-adjusted performance than passively managed bond ETFs. There is a visible lack of comparative research on bond ETFs and bond funds. There is a visible lack of comparative research on bond ETFs and bond funds To address this gap the problem of the research is focused on how risk-adjusted performance may differ according to the elected bond instruments—bond ETFs and bond funds. Comparative analysis, statistical analysis, and risk performance ratio calculations were used to test the credibility of the hypothesis
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
