15-06-2012 · Research

On the performance of fixed income exchange-traded funds

Are fixed income exchange-traded funds (ETFs) really able to track their benchmarks? Our findings suggest transaction costs lead to underperformance.

    Autoren/Autorinnen

  • Patrick Houweling

    Co-Head of Quant Fixed Income and Lead Portfolio Manager

In this paper,1 we evaluate the performance of fixed income ETFs. We find that Treasury ETFs are indeed able to track their benchmarks but that investment grade corporate bond ETFs underperform their benchmarks and high yield corporate bond ETFs severely underperform their benchmarks.

We provide evidence that the transaction costs of the underlying bonds are a key determinant of an ETF’s underperformance. We conclude that indices consisting of bonds that are more costly to trade are more difficult to track.

Bleiben Sie in Bezug auf Einsichten zu Quantitative Investing auf dem Laufenden.

Receive our Robeco newsletter and be the first one to get the latest insights, or build the greenest portfolio.

Jetzt anmelden

Footnote

1Houweling, P., 2012, ‘On the performance of fixed-income exchange-traded funds’, The Journal of Index Investing.

Laden Sie die Publikation herunter