Milan Szabo
This paper explores liquidity management practices in Czech open-ended bond and equity funds. I reconstruct cash flows stemming from investors and securities and cash flows related to purchases and sales in portfolios and margin calls to study liquidity transformation and liquidity management in investment funds. I point to multiple factors, such as portfolio illiquidity and current market conditions, that influence the joint behavior between investor redemptions and funds’ liquidity management. I then investigate how funds replenished their liquid buffers and show that relaxation of liquidity transformation and more aggressive sales from funds’ portfolios are the main channels through which funds rebuild their liquid buffers.
JEL codes: G11, G23, G30
Keywords: Investment fund, liquidity management, liquidity transformation
Issued: June 2022
Download: CNB WP No. 6/2022 (pdf, 1.6 MB)