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Fund fragility: The role of fund ownership base

Author

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  • Allaire, Nolwenn
  • Breckenfelder, Johannes
  • Hoerova, Marie

Abstract

Mutual fund fragility has been linked to liquidity transformation by funds. We show that it matters whom funds provide liquidity to. Two dimensions of fund ownership base affect financial fragility: owner type and owner domicile. Comparing flows across different fund shares of the same fund on the same day, we find that fund shares held more by other mutual funds (households) suffer significantly higher (lower) redemptions. Furthermore, fund shares held more by non-domestic funds suffer substantially higher redemptions. We link redemptions by the most run-prone fund owners to their desire to minimize fire-sale spillovers to their own portfolios.

Suggested Citation

  • Allaire, Nolwenn & Breckenfelder, Johannes & Hoerova, Marie, 2024. "Fund fragility: The role of fund ownership base," CEPR Discussion Papers 19201, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19201
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    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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