Edith Cowan University
Place of Publication
Joondalup, Western Australia
Faculty of Business and Public Management
School of Finance and Business Economics
In this paper we analyse the performance of fixed interest managed funds. We examine five measurement models across three risk-free proxies, nine benchmarks (covering conditional and unconditional as well as single and multi factor definitions) over two independent periods in an effort to identify (in a consistent setting) the most accurate and least biased methodology. The use of an Australian dataset, sourced from the Australian fund-rating agency ASSIRT means that we can provide some independent results from US studies of these. There is little prior work on Australian fixed-interest managed funds. We examine three risk-free proxies, six benchmark classes encompassing twenty-one potential factors, across five models and two independent time frames. The task is complicated by two issues – an acute lack of Australian data (demanding additional bootstrap simulations and bridging tests with the US markets) and the need for a two-pass (time-series and cross-sectional) analysis, arising from the different information content benchmarks carry in these two dimensions. The results, consistent across time, show that a correct combination of a bond market variable, a mixture of interest rate factors and economic factors as well as the proxy for movements in the equity markets yield the optimal benchmark.