Characteristics and performance of real return funds
DOI:
https://doi.org/10.61190/fsr.v22i3.4656Keywords:
Inflation-protected securities, TIPS, Real return funds, Mutual fund performanceAbstract
U.S. Treasury Inflation-Protected Securities (TIPS) are the primary security in real return mutual funds. This article focuses on a key question for investors: Do real return mutual funds add value to a portfolio or are they just redundant securities? We find that while some real return funds do provide a return in excess of the rate of inflation, their absolute and risk-adjusted returns are rarely better than a TIPS Index. Further, few of these funds provide investors with positive alpha after controlling for either their benchmarks or macroeconomic and systematic factors.
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