Death,Taxes and Short-Term Underperformance: Fixed Income Funds

5 Pages Posted: 20 Dec 2015

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2015


“In this world nothing can be said to be certain, except death and taxes.” — Benjamin Franklin

The Brandes Institute has added a third example to Ben Franklin’s famous quote about life’s certainties: short-term underperformance among active managers.

Over the years, Institute research has shown active managers, even the best-performing ones, suffer periods of weak returns relative to the Barclays Aggregate U.S. Bond Index and their peers. But underperformance, even up to three years, had relatively little impact on the best-performing funds’ ability to deliver success over a 10-year period.

Ultimately, it may prove short-sighted to fire good managers when they underperform. Instead, it is important to consider other material factors when evaluating managers — such as investment philosophy, process, organizational culture and alignment with client interests — to help distinguish weak short-term returns from other, more serious problems.

The original Death, Taxes and Short-Term Underperformance studies examined a number of asset classes. Here, we revisited our work on fixed income funds and found the same patterns of short-term underperformance for the best-performing funds.

Investigating Short-Term Underperformance Among Fixed Income Funds: Identify the top long-term performers; Reveal their short-term challenges.

Keywords: short-term underperformance, fixed income funds, mutual funds

JEL Classification: G10, G11, G14, G15, G20, G22, G23, G30

Suggested Citation

Institute, Brandes, Death,Taxes and Short-Term Underperformance: Fixed Income Funds (March 1, 2015). Brandes Institute Research Paper No. 2015-01. Available at SSRN: or

Brandes Institute (Contact Author)

Brandes Investment Partners ( email )

11988 El Camino Real, Suite 500
P.O. Box 919048
San Diego, CA 92191-9048
United States

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