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Emerging market capital flows the role of fund manager portfolio allocation

Georgia Bush, Cañón Salazar Carlos Iván and Gray Daniel

No 2021-13, Working Papers from Banco de México

Abstract: We exploit individual security holdings data for global mutual funds to distinguish between two reasons why a fund's holdings of emerging market economy (EME) bonds might change: (i) the amount invested in the fund changes and (ii) the fund manager changes portfolio allocations. We find that funds' responsiveness to global macroeconomic conditions, ''push factors'', is explained by investor flow decisions. Conversely, funds' responsiveness to local macroeconomic conditions, ''pull factors'', is explained by manager reallocation decisions. We also identify other institutional factors which impact reallocation decisions: their leverage, their benchmark, and risk appetite (funds reallocate towards safer EMEs when global risk increases).

Keywords: mutual funds; capital flows; emerging markets; portfolio allocation (search for similar items in EconPapers)
JEL-codes: F32 G11 G15 G23 (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-cwa, nep-fmk, nep-ifn and nep-opm
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