Meeting investor outflows in Czech bond and equity funds: horizontal or vertical?

Milan Szabo

Empirica, 2022, vol. 49, issue 4, No 8, 1123-1151

Abstract: Abstract This paper explores liquidity management practices in Czech open-ended bond and equity funds. I reconstruct cash flows stemming from investors and securities, and cash flows related to purchases and sales in portfolios and margin calls to study liquidity transformation and liquidity management in investment funds. I study how portfolio illiquidity and current market conditions influence the joint behavior between investor redemptions and funds’ liquidity management. I point to a strong propensity to reduce the liquid buffers rather than sales of securities to meet redemptions in bond funds. The propensity increases with portfolio illiquidity. I show equity funds historically tended to dash for cash in response to investor redemptions during a severe market turmoil.

Keywords: Investment fund; Liquidity management; Liquidity transformation (search for similar items in EconPapers)
JEL-codes: G11 G23 G30 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10663-022-09553-w

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