Fund fragility: The role of fund ownership base

Nolwenn Allaire, Johannes Breckenfelder and Marie Hoerova

No 19201, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Mutual fund fragility has been linked to liquidity transformation by funds. We show that it matters whom funds provide liquidity to. Two dimensions of fund ownership base affect financial fragility: owner type and owner domicile. Comparing flows across different fund shares of the same fund on the same day, we find that fund shares held more by other mutual funds (households) suffer significantly higher (lower) redemptions. Furthermore, fund shares held more by non-domestic funds suffer substantially higher redemptions. We link redemptions by the most run-prone fund owners to their desire to minimize fire-sale spillovers to their own portfolios.

JEL-codes: G01 G10 G21 G23 (search for similar items in EconPapers)
Date: 2024-07
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