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How do Canadian Corporate Bond Mutual Funds Meet Investor Redemptions?

Author

Listed:
  • Guillaume Ouellet Leblanc
  • Rohan Arora

Abstract

When investors redeem their fund shares for cash, fixed-income fund managers can choose whether to draw on their liquid holdings or sell bonds in the secondary market. We analyze the liquidity-management decisions of Canadian corporate bond mutual funds, focusing on the strategies they use to meet investor redemptions.

Suggested Citation

  • Guillaume Ouellet Leblanc & Rohan Arora, 2018. "How do Canadian Corporate Bond Mutual Funds Meet Investor Redemptions?," Staff Analytical Notes 2018-14, Bank of Canada.
    • Handle: RePEc:bca:bocsan:18-14
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    File URL: https://www.bankofcanada.ca/2018/05/staff-analytical-note-2018-14/
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    References listed on IDEAS

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    1. Dick-Nielsen, Jens & Feldhütter, Peter & Lando, David, 2012. "Corporate bond liquidity before and after the onset of the subprime crisis," Journal of Financial Economics, Elsevier, vol. 103(3), pages 471-492.
    2. Rohan Arora & Nadeem Merali & Guillaume Ouellet Leblanc, 2018. "Did Canadian Corporate Bond Funds Increase their Exposures to Risks?," Staff Analytical Notes 2018-7, Bank of Canada.
    3. Chernenko, Sergey & Sunderam, Adi, 2016. "Liquidity transformation in asset management: Evidence from the cash holdings of mutual funds," ESRB Working Paper Series 23, European Systemic Risk Board.
    4. Chen, Qi & Goldstein, Itay & Jiang, Wei, 2010. "Payoff complementarities and financial fragility: Evidence from mutual fund outflows," Journal of Financial Economics, Elsevier, vol. 97(2), pages 239-262, August.
    5. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    6. Sergey Chernenko & Adi Sunderam, 2016. "Liquidity Transformation in Asset Management: Evidence from the Cash Holdings of Mutual Funds," NBER Working Papers 22391, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Rohan Arora & Guillaume Bédard-Pagé & Guillaume Ouellet Leblanc & Ryan Shotlander, 2019. "Could Canadian Bond Funds Add Stress to the Financial System?," Staff Analytical Notes 2019-9, Bank of Canada.
    2. Rohan Arora, 2018. "Redemption Runs in Canadian Corporate Bond Funds?," Staff Analytical Notes 2018-21, Bank of Canada.
    3. Guillaume Bédard-Pagé, 2019. "Non-Bank Financial Intermediation in Canada: An Update," Discussion Papers 2019-2, Bank of Canada.
    4. Rohan Arora & Guillaume Bédard-Pagé & Guillaume Ouellet Leblanc & Ryan Shotlander, 2019. "Bond Funds and Fixed-Income Market Liquidity: A Stress-Testing Approach," Technical Reports 115, Bank of Canada.
    5. Rohan Arora & Guillaume Bédard-Pagé & Guillaume Ouellet Leblanc & Ryan Shotlander, 2019. "Les fonds d’obligations canadiennes peuvent-ils amplifier les tensions subies par le système financier?," Staff Analytical Notes 2019-9fr, Bank of Canada.
    6. Charles Gaa & Xuezhi Liu & Cameron MacDonald & Xiangjin Shen, 2019. "Assessing the Resilience of the Canadian Banking System," Staff Analytical Notes 2019-16, Bank of Canada.
    7. Gabriel Bruneau & Javier Ojea Ferreiro & Andrew Plummer & Marie-Christine Tremblay & Aidan Witts, 2023. "Understanding the Systemic Implications of Climate Transition Risk: Applying a Framework Using Canadian Financial System Data," Discussion Papers 2023-32, Bank of Canada.
    8. Charles Gaa & Xuezhi Liu & Cameron MacDonald & Xiangjin Shen, 2019. "Évaluer la résilience du système bancaire canadien," Staff Analytical Notes 2019-16fr, Bank of Canada.
    9. Rohan Arora & Chen Fan & Guillaume Ouellet Leblanc, 2019. "Liquidity Management of Canadian Corporate Bond Mutual Funds: A Machine Learning Approach," Staff Analytical Notes 2019-7, Bank of Canada.
    10. Jean-Sébastien Fontaine & Corey Garriott & Jesse Johal & Jessica Lee & Andreas Uthemann, 2021. "COVID-19 Crisis: Lessons Learned for Future Policy Research," Discussion Papers 2021-2, Bank of Canada.

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    More about this item

    Keywords

    Financial markets; Financial stability;

    JEL classification:

    • G - Financial Economics
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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