Maturity-Matched Bond Fund Performance

Performance regressions lever expected benchmark returns linearly to the risk exposures of fund. The interest rate (IR) premium, however, usually follows a decreasingly upward-sloping yield curve, characterizing nonlinearity between return and IR exposure—for example, maturity or duration. If fund differ, this discrepancy causes alpha deviate from active bond selection performance it is supposed measure. ratings investor flows are affected by deviation. Our simple remedy individually match funds benchmarks using their durations. Beta R2 candidates for alternative matchings.