Asset Managers as Buyers of Last Resort

55 Pages Posted: 24 Jun 2020 Last revised: 7 Jan 2021

See all articles by Benjamin Golez

Benjamin Golez

University of Notre Dame

Antonino Emanuele Rizzo

Nova School of Business and Economics

Rafael Zambrana

University of Notre Dame - Mendoza College of Business

Date Written: May 20, 2020

Abstract

We show that mutual funds systematically overweight financial companies that are ultimate owners of their brokers. Moreover, in times of distress, funds act as buyers of last resort and increase their ownership in their brokers' companies. The results indicate that such trading activity contributes to the price stability of large financial conglomerates, which has implications for the systemic risk of the financial sector. Portfolio performance analysis suggests that funds act as buyers of last resort for brokers that provide them with privileged investment information. The relationship is strongest for brokers that have long-lasting business ties with their clients. Exogenous changes in business ties due to brokerage firm acquisitions confirm the causal nature of the relationship.

Keywords: Asset management, brokers, price support, liquidity provision, systemic risk, financial stability

JEL Classification: G01, G11, G21, G23, G24, G28

Suggested Citation

Golez, Benjamin and Rizzo, Antonino Emanuele and Zambrana, Rafael, Asset Managers as Buyers of Last Resort (May 20, 2020). Available at SSRN: https://ssrn.com/abstract=3606208 or http://dx.doi.org/10.2139/ssrn.3606208

Benjamin Golez

University of Notre Dame ( email )

256 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
(574) 631-1458 (Phone)

HOME PAGE: http://business.nd.edu/BenGolez/

Antonino Emanuele Rizzo

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

Rafael Zambrana (Contact Author)

University of Notre Dame - Mendoza College of Business ( email )

Notre Dame, IN 46556-5646
United States

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