Unconventional Monetary Policy and the Portfolio Choice of International Mutual Funds

63 Pages Posted: 18 Jan 2018

See all articles by Gino Cenedese

Gino Cenedese

Fulcrum Asset Management

Ilaf Elard

New York University Shanghai

Date Written: January 12, 2018

Abstract

Unconventional monetary policy (UMP) by the US Federal Reserve, Bank of England, Bank of Japan, and European Central Bank affects the geographical portfolio choice of international mutual fund managers. UMP prompts managers of mutual funds to rebalance their portfolios away from the country conducting UMP, and increase their geographical allocation to other developed markets; there is little evidence of rebalancing towards emerging markets. The international spillover effects from UMP announcement surprises are of small economic magnitude, in contrast to the effects of actual UMP operations in the form of large-scale asset purchases (LSAPs). The results imply that while not contributing to QE-induced capital flows to emerging markets, mutual fund managers play a role in the transmission of unconventional monetary policy, in particular LSAPs, across developed markets.

Keywords: unconventional monetary policy, portfolio rebalancing, international spillovers, asset allocation, mutual funds

JEL Classification: F30, G11, G15, G23

Suggested Citation

Cenedese, Gino and Elard, Ilaf, Unconventional Monetary Policy and the Portfolio Choice of International Mutual Funds (January 12, 2018). Bank of England Working Paper No. 705. Available at SSRN: https://ssrn.com/abstract=3104504 or http://dx.doi.org/10.2139/ssrn.3104504

Gino Cenedese (Contact Author)

Fulcrum Asset Management ( email )

66 Seymour Street
London, W1H 5BT
United Kingdom

Ilaf Elard

New York University Shanghai ( email )

1555 Century Avenue
Pudong New District
Shanghai, 200120
China

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