Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144612
Authors: 
Agarwal, Vikas
Zhao, Haibei
Year of Publication: 
2016
Series/Report no.: 
CFR Working Paper 15-09 [rev.]
Abstract: 
Although the 1940 Act restricts interfund lending within a mutual fund family, families can apply for exemptions from the regulator to participate in interfund lending. We find that heterogeneity in portfolio liquidity and investor flows across funds, funds' investment restrictions, and governance mechanisms determine the applications for interfund lending. We document several costs and benefits of interfund lending after the application. Costs include lower sensitivity of managers' turnover to past performance and greater investor withdrawal for poorly governed funds. Benefits include funds holding more illiquid and concentrated portfolios, and being less susceptible to runs. Finally, well-governed funds perform better.
Subjects: 
funding liquidity
fund families
internal capital markets
fund performance
JEL: 
G18
G23
G32
Document Type: 
Working Paper

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