When the panic broke out: COVID-19 and investment funds' portfolio rebalancing around the world
Massimiliano Affinito and
Raffaele Santioni ()
Additional contact information
Raffaele Santioni: Bank of Italy
No 1342, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area
To contribute to the understanding of investment funds' (IFs) behaviour, the paper exploits the exogenous shock of the COVID-19 pandemic and analyses more than 12 million security sales and purchases during the first four months of 2020 by over 20,000 IFs from more than 40 national jurisdictions and investing in more than 100 economies and 20 industries. Our estimates reveal that, when the emergency strikes, IFs do not sell indiscriminately but divest from assets considered the most vulnerable at the moment, that is, those issued by more COVID-affected countries and industries. Our results also show several dimensions of heterogeneity according to the pandemic outbreak phase, asset type, IF category and performance, extent of unitholders' outflows, and nationality of IFs. Our results, on the one hand, provide new evidence on the intrinsic fragility of IFs and the connection between their choices and fire sales, but, on the other, they also show that IF industry includes heterogeneous institutions that behave very differently. Finally, our results document that monetary policy measures have a reassuring effect also for IFs, which corroborates recent evidence on a non-bank financial institution channel of unconventional monetary policies.
Keywords: coronavirus; Covid-19; investment funds; Morningstar holdings; pandemic; portfolio rebalancing; resilience. (search for similar items in EconPapers)
JEL-codes: G01 G12 G15 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://www.bancaditalia.it/pubblicazioni/temi-dis ... 342/en_tema_1342.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1342_21
Access Statistics for this paper
More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by ().