Comparative Risk-Return Performance Analysis of Large and Small Fixed-Income Investment Funds: Evidence from Iran’s Capital Market

Document Type : Original Article

Authors

1 Department of Accounting and Finance, ST.C, Islamic Azad University, Tehran, Iran

2 MA in finance , Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran

3 Ph.D. Student in Monetary Economics, Faculty of Economics, University of Allameh Tabataba’i ,Tehran, Iran

10.48308/jfmp.2026.241798.1538

Abstract

Objective: With the expansion of the fixed-income fund market in recent years in Iran’s capital market, the need to examine the performance of these funds has become increasingly important. This study investigates the performance differences between large and small investment funds in Iran’s capital market. The significance of this issue stems from the sharp increase in the number of fixed-income funds during this period, as well as the conflicting evidence in international literature. While some studies emphasize the benefits of economies of scale in large funds, others report a decline in efficiency as fund size grows. The central question of this research is whether there is a significant difference in the returns and risks of large versus small funds, and what implications these differences hold for investors. Method: Using monthly return data from fixed-income funds, this study compares the returns of small funds with those of large funds. To this end, data on returns, total assets under management, and net asset value of fixed-income funds were collected for the period from the beginning of 2021 to the end of June 2025. For each month, the return of a portfolio consisting of the smallest funds was compared with that of a portfolio consisting of the largest funds. Ultimately, the Wilcoxon test was employed to compare the returns of the two groups. To assess risk, a paired bootstrap method and the Wilcoxon test were applied to the distributions. In addition, the Sharpe ratio was calculated for both groups to compare large and small funds. Findings: The findings of this study indicate that the monthly returns of small fixed income funds are significantly higher than those of large funds, with average returns of 1.8629% for small funds and 1.7963% for large funds. In addition, the paired Wilcoxon test and paired bootstrap analysis confirmed that risk (return dispersion and variance) is significantly higher in small funds, with a variance ratio of 0.67 and a 95% confidence interval. Finally, the calculation of the Sharpe ratio showed that the risk adjusted performance of large funds is slightly better than that of small funds, thereby rejecting the research hypotheses stating that there is no significant difference in return and risk between the two groups. Examination of the Sharpe ratio, which reflects risk adjusted performance, demonstrated that large funds exhibit higher desirability. In other words, although the returns of small funds are higher than those of large funds, their excess returns are lower relative to the level of risk undertaken. Conclusion: The results of this research can be interpreted within the context of the Iranian capital market, which is characterized by high inflation, interest rate volatility, and geopolitical risks. Smaller funds have managed to achieve higher returns, but these returns have also been accompanied by greater risk. Conversely, larger funds have yielded lower returns but have exhibited correspondingly lower risk. These characteristics create a competitive advantage for larger funds in the Iranian market, where investors often seek to preserve asset value against numerous systematic risks. These findings suggest that large funds demonstrate more stable returns and better risk management compared to small funds. From a policy-making perspective, oversight of smaller funds appears necessary due to the higher risks they exhibit.

Keywords

References

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Financial Management Perspective
Volume 15, Issue 4 - Serial Number 52
January 2026
Pages 126-143

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