Risk Exposure and Net Flow in Investment Funds: Do Shareholders Monitor Asset Allocation?

Rafael Felipe Schiozer () and Diego Lins de Albuquerque Pennachi Tejerina ()
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Rafael Felipe Schiozer: EAESP/FGV
Diego Lins de Albuquerque Pennachi Tejerina: Banco Itaú-Unibanco

Brazilian Review of Finance, 2013, vol. 11, issue 4, 527-558

Abstract: This study investigates the impact of asset allocation on the net flow of fixed income funds in the Brazilian market, by exploiting the exogenous variation in the risk perception of bank liabilities (CDs) caused by the financial turmoil that followed Lehman Brothers’ demise in September 2008. The central hypothesis is that the exposure to assets negatively affected by the crisis impacts negatively the fund’s net flow. We find that, for mutual funds, the larger proportion of assets negatively affected by the crisis the larger the net outflow of resources, indicating that shareholders monitor asset allocation and exert disciplining power on fund managers by withdrawing their resources. In exclusive (fundos exclusivos, i.e., funds with a single shareholder), for which the shareholder is presumed to exert more influence on asset reallocation, we find no significant relationship between the exposure to assets negatively affected by the crisis and net flows.

Keywords: Investment Funds; Risk; Credit Risk; Financial Crisis; Informational Asymmetry; Asset Allocation; Net Flow (search for similar items in EconPapers)
JEL-codes: G01 G11 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:11:y:2013:i:4:p:527-558

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