Bond Mutual Funds, Closed-End Bond Funds, and Exchange-Traded Funds

Abstract This chapter provides an overview of the academic literature involving bond mutual funds, closed-end bond funds (CEFs), and exchange-traded funds (ETFs). Since the turn of the century, the net assets under management (AUM) of investment firms have increased steadily. The composition of the net AUM has also changed in favor of ETFs. As more money flows to bond funds, bond CEFs, and ETFs, the issue for investment firms continues to be how to provide risk-adjusted returns to investors while minimizing expenses. The existing literature tends to report mixed evidence on the performance of bond mutual funds, bond CEFs, and ETFs. Most studies comparing performance against their benchmark index report widespread underperformance. However, actively managed global bond funds tend to provide higher risk-adjusted returns.