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Capital flows: The role of investment fund portfolio managers

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  • Bush, Georgia
  • Cañón, Carlos

Abstract

This paper analyzes drivers of capital flows channeled by open-ended mutual funds, disentangling flows resulting from investor behavior and those resulting from fund manager reallocation. Using security-level data from Morningstar, we construct a novel dataset of global bond funds for the period 2011 to 2017, whose holdings include securities from 18 emerging market economies. By disaggregating flows and leveraging country-fund variation, we are able to identify differentiated effects of push and pull factors on investor flows versus manager reallocation. We exploit the fund security holdings data further to implement a shift-share estimation approach. In addition, we are able to provide evidence of what institutional factors are influencing managers (liquidity, leverage, benchmarks). Finally, using textual analysis of funds’ prospectuses, we construct a measure of manager discretion, execute a difference-in-difference specification for the Taper Tantrum, and find funds with higher manager discretion were less prone to disinvesting from EMEs.

Suggested Citation

  • Bush, Georgia & Cañón, Carlos, 2025. "Capital flows: The role of investment fund portfolio managers," Journal of International Economics, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:inecon:v:154:y:2025:i:c:s0022199625000182
    DOI: 10.1016/j.jinteco.2025.104062
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    More about this item

    Keywords

    Capital flows; Emerging markets; Non-bank financial intermediaries; Asset allocation;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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