Fixed-income Fund Performance: Impact of Sponsor Ownership and Role of Luck and Ability in Tail Membership

The unconditional risk-adjusted performance of a comprehensive and survivorship-free sample of Canadian bond funds is negative, improves with full conditioning, and is sensitive to the choice of the return-generating process. The use of a multi-factor model that also captures maturity differences not only enhances estimated performance but its conditional version best describes the return-generating process of Canadian fixed-income funds. An examination of funds in the tails of the performance distribution using the block-bootstrap method suggests that “bad luck” causes underperformance, and only one or two funds possess truly superior management skills. Funds sponsored by a credit union, cooperative, mutualist, independents, or not publicly traded management companies exhibit relative outperformance.