Mutual fund suspensions during the COVID-19 market turmoil - asset liquidity, liquidity management tools and spillover effects

Michael Grill, Luis Molestina Vivar and Michael Wedow

Finance Research Letters, 2022, vol. 50, issue C

Abstract: We investigate the drivers and impact of suspending redemptions for European mutual funds. Using a novel data set of funds that suspended redemptions during the COVID19 market turmoil in March 2020, we find that illiquid funds invested in real estate are substantially more likely to suspend than other funds. Suspensions are also strongly correlated with funds’ cash holdings, leverage, age and the availability of ex-ante liquidity tools. We also find that suspensions result in lower inflows for the suspending funds once they re-open and for associated non-suspending funds belonging to the same asset management company, suggesting spillover effects from suspensions.

Keywords: Mutual funds; Suspension of redemption; Fund fragility (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004469

DOI: 10.1016/j.frl.2022.103249

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