The Role of Mature Market Mutual Funds in Emerging Markets: Myth or Mayhem?

25 Pages Posted: 13 Sep 2004

See all articles by Li Ong

Li Ong

International Monetary Fund (IMF)

Amadou Nicolas Racine Sy

International Monetary Fund (IMF) - International Capital Markets Department; Brookings Institution

Date Written: July 2004

Abstract

The expansion of the global mutual fund industry has been represented by both, its growth in mature as well as in emerging markets. This has clearly contributed to the development of local securities markets in emerging economies, which in turn, has been key in attracting investment inflows from overseas funds. A major concern, however, is that large foreign investors could significantly disrupt the stability of local capital markets in the event of a market shock, with systemic implications for the real economy. Our estimates suggest that while local investors remain the more important group in terms of market share, the influence of foreign funds remains cannot be discounted. Asset allocation decisions by mature market funds - both dedicated and crossover - in aggregate, could affect emerging markets. In particular, European mutual funds appear to play a much bigger role than their US counterparts in emerging markets.

Keywords: Asset allocation, crossover investors, dedicated investors, emerging markets, mature markets, mutual funds

JEL Classification: F21, G15

Suggested Citation

Ong, Li and Sy, Amadou Nicolas Racine, The Role of Mature Market Mutual Funds in Emerging Markets: Myth or Mayhem? (July 2004). IMF Working Paper No. 04/133, Available at SSRN: https://ssrn.com/abstract=588244 or http://dx.doi.org/10.2139/ssrn.588244

Li Ong (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Amadou Nicolas Racine Sy

International Monetary Fund (IMF) - International Capital Markets Department ( email )

700 19th Street NW
Room 9-548
Washington, DC 20431
United States
202-623-8651 (Phone)
202-589-8561 (Fax)

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

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