Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/222546
Authors: 
Barbu, Alexandru
Fricke, Christoph
Mönch, Emanuel
Year of Publication: 
2020
Series/Report no.: 
Bundesbank Discussion Paper 38/2020
Abstract: 
Institutional funds have concentrated ownership by a few institutional investors, infrequent outflows and essentially no leverage. Yet using unique granular data on the bond holdings of institutional funds, we show that their trading behavior is strongly procyclical: they actively move into higher yielding, longer duration and lower rated securities in response to lower in-terest rates, and vice versa. Institutional funds' risk-taking increases when interest rates turn negative, particularly in funds with explicit minimum return guarantees. Their trading has large and persistent price impact. We provide evidence that this procyclical behavior is driven by career concerns among institutional fund managers.
Subjects: 
institutional funds
institutional accounts
procyclical asset management
portfolio rebalancing
price impact
demand pressures
asset price volatility
career concerns
JEL: 
G11
G23
E43
ISBN: 
978-3-95729-738-9
Document Type: 
Working Paper

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