Are Asset Managers Vulnerable to Fire Sales?

Nicola Cetorelli, Fernando Duarte and Thomas Eisenbach

No 20160218, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: According to conventional wisdom, an open-ended investment fund that has a floating net asset value (NAV) and no leverage will never experience a run and hence never have to fire-sell assets. In that view, a decline in the value of the fund’s assets will just lead to a commensurate and automatic decline in the fund’s equity—end of story. In this post, we argue that the conventional wisdom is incomplete and then explore some of the systemic risk consequences of investment funds’ vulnerabilities to fire-sale spillovers.

Keywords: Systemic Risk; Mutual Fund; asset managers; Fire-Sales (search for similar items in EconPapers)
JEL-codes: G2 G3 (search for similar items in EconPapers)
Date: 2016-02-18
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Citations: View citations in EconPapers (23)

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