This paper examines the investment performance of active Australian bond funds and the impact of investor fund flows on portfolio returns. Security selection and market timing performance are evaluated using both unconditional models and conditional-performance evaluation techniques that account for public information and the time variation in risk. Overall, the results of this paper are consistent with the US and international evidence, documenting that performance is consistent with an efficient market. While actively managed institutional funds perform broadly in line with the index before expenses, the paper documents significant underperformance for retail Australian bond funds after fees. The study also documents that retail fund flows negatively impact on market timing coefficients.