Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/244268 
Year of Publication: 
2021
Series/Report no.: 
ESRB Working Paper Series No. 116
Publisher: 
European Systemic Risk Board (ESRB), European System of Financial Supervision, Frankfurt a. M.
Abstract: 
We use unique institutional securities holdings data to examine the trading behaviour of delegated institutional capital and its impact on bond risk premia. We show that institutional fund managers trade strongly procyclically: they actively move into higher yielding, longer duration and lower rated securities as yields fall and spreads compress, and vice versa. Funds more exposed to negative yields increase their risk-taking more strongly, and this effect is particularly pronounced for those offering explicit minimum return guarantees. Institutional funds' investments have large and persistent price impact in both corporate and sovereign bond markets. We provide evidence that this procyclical behaviour 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
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4619-3
Document Type: 
Working Paper

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