IDEAS home Printed from https://ideas.repec.org/p/fip/fedgfn/103678.html

Liquidity Transformation Risks in U.S. Bank Loan and High-Yield Mutual Funds: A 2026 Update

Author

Listed:
  • Kenechukwu E. Anadu
  • Sean Baker
  • Fang Cai
  • Logan E. George
  • Erik Larsson

Abstract

Mutual funds (MFs) and other open-ended collective investment funds engage in liquidity transformation—they offer investors daily redemptions while investing in assets that may take longer than a day to sell without significant price impact. This activity is particularly salient for corporate debt funds, where large investor redemptions during stress periods could result in fire sales that adversely affect underlying markets (see, e.g., Goldstein, Jiang, and Ng, 2017; Chernenko and Sunderam, 2020; Falato, Goldstein, and Hortaçsu, 2021; Federal Reserve Board, 2025).

Suggested Citation

  • Kenechukwu E. Anadu & Sean Baker & Fang Cai & Logan E. George & Erik Larsson, 2026. "Liquidity Transformation Risks in U.S. Bank Loan and High-Yield Mutual Funds: A 2026 Update," FEDS Notes 2026-08-19, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfn:103678
    DOI: 10.17016/2380-7172.4123
    as

    Download full text from publisher

    File URL: https://www.federalreserve.gov/econres/notes/feds-notes/liquidity-transformation-risks-in-u-s-bank-loan-and-high-yield-mutual-funds-a-2026-update-20260819.html
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.17016/2380-7172.4123?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedgfn:103678. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ryan Wolfslayer ; Keisha Fournillier (email available below). General contact details of provider: https://edirc.repec.org/data/frbgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.