Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278379 
Year of Publication: 
2023
Series/Report no.: 
ESRB Working Paper Series No. 140
Publisher: 
European Systemic Risk Board (ESRB), European System of Financial Supervision, Frankfurt a. M.
Abstract: 
We study the role of liquidity management tools (LMTs) in mitigating financial fragility in investment funds during the COVID-19 market distress. We employ a unique dataset that reports the availability of different types of LMTs in a sample of Irish-domiciled corporate bond funds. We find that funds with access to price-based tools such as redemption fees or anti-dilution levies experienced lower net outflows in March 2020, as compared to funds with only quantity-based tools such as redemption gates, temporary suspensions or redemption in kind. This difference is stronger among funds with a high sensitivity of flows to past-performance and reflects both higher gross in- flows and lower gross outflows during this episode. Funds with price-based LMTs also rebalance their portfolios towards less liquid bonds, which results in lower price fragility among bonds held disproportionally by our sample of Irish-domiciled funds.
Subjects: 
liquidity management tools
investment funds
COVID-19
financial fragility
JEL: 
G2
G23
Persistent Identifier of the first edition: 
ISBN: 
978-92-9472-327-7
Document Type: 
Working Paper

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