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Meeting Investor Outflows in Czech Bond and Equity Funds: Horizontal or Vertical?

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  • Milan Szabo

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 point to multiple factors, such as portfolio illiquidity and current market conditions, that influence the joint behavior between investor redemptions and funds' liquidity management. I then investigate how funds replenished their liquid buffers and show that relaxation of liquidity transformation and more aggressive sales from funds' portfolios are the main channels through which funds rebuild their liquid buffers.

Suggested Citation

  • Milan Szabo, 2022. "Meeting Investor Outflows in Czech Bond and Equity Funds: Horizontal or Vertical?," Working Papers 2022/6, Czech National Bank.
    • Handle: RePEc:cnb:wpaper:2022/6
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    Cited by:

    1. Milan Szabo, 2023. "Cyclical Investment Behavior of Investment Funds: Its Heterogeneity and Drivers," Working Papers 2023/5, Czech National Bank.
    2. Hodula, Martin & Szabo, Milan & Bajzík, Josef, 2024. "Retail fund flows and performance: Insights from supervisory data," Emerging Markets Review, Elsevier, vol. 59(C).
    3. Paulo Leite, 2024. "Performance and investment styles of international multi-asset funds during market crises," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(3), pages 783-805, August.

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    More about this item

    Keywords

    Investment fund; liquidity management; liquidity transformation;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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