Liquidity Management and Asset Sales by Bond Funds in the Face of Investor Redemptions in March 2020

8 Pages Posted: 29 Mar 2021

See all articles by Andreas Schrimpf

Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department; Centre for Economic Policy Research (CEPR); University of Tuebingen

Ilhyock Shim

Bank for International Settlements (BIS)

Hyun Song Shin

Bank for International Settlements (BIS)

Date Written: March 17, 2021

Abstract

Investor redemptions are one factor behind asset sales by open-ended mutual funds, but an important additional factor is the selling due to the funds' liquidity management.

Funds holding illiquid assets reacted to redemptions in March 2020 by adding to their cash buffers even after meeting investor redemptions. For such funds, asset sales exceeded investor redemptions.

Increases in end-of-period cash holdings were less pronounced for funds that started the stress period with larger buffers, suggesting that such funds were less prone to selling at the height of the stress.

Suggested Citation

Schrimpf, Andreas and Shim, Ilhyock and Shin, Hyun Song, Liquidity Management and Asset Sales by Bond Funds in the Face of Investor Redemptions in March 2020 (March 17, 2021). Available at SSRN: https://ssrn.com/abstract=3799868 or http://dx.doi.org/10.2139/ssrn.3799868

Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Tuebingen ( email )

Wilhelmstr. 19
72074 Tuebingen, Baden Wuerttemberg 72074
Germany

Ilhyock Shim

Bank for International Settlements (BIS) ( email )

78F, Two International Finance Centre
8 Finance Street, Central
Hong Kong, n/a n/a
Hong Kong

HOME PAGE: http://www.bis.org/author/ilhyock_shim.htm

Hyun Song Shin (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

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