Mutual fund investment in emerging markets - an overview
International mutual funds are one of the main channels for capital flows to emerging economies. Although mutual funds have become important contributors to financial market integration, little is known about their investment allocation, and strategies. The authors provide an overview of mutual fund activity in emerging markets. First, they describe international mutual funds'relative size, asset allocation, and country allocation. Second, they focus on fund behavior during crises, by analyzing data at the level of both investors, and fund managers. Among their findings: Equity investment in emerging markets has grown rapidly in the 1990s, much of it flowing through mutual funds. Collectively, these funds hold a sizable share of market capitalization in emerging economies. Asian, and Latin American funds achieved the fastest growth, but are smaller than domestic U.S. funds and world funds. When investigating abroad, U.S. mutual funds invest more in equity than in bonds. World funds invest mainly in developed nations (Canada, Europe, Japan, and the United States). Ten percent of their investment is in Asia, and Latin America. Mutual funds usually invest in a few countries within each region. Mutual fund investment was very responsive to the crises of the 1990s. Withdrawals from emerging markets during recent crises were large, which squares with existing evidence of financial contagion. Investments in Asian, and Latin American mutual funds are volatile. Because redemptions, and injections are large, relative to total funds under management, fund's flows are not stable. The cash held by managers during injections, and redemptions does not fluctuate significantly, so investors'actions are typically reflected in emerging market inflows, and outflows.
|Date of creation:||31 Jan 2001|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Graciela Kaminsky & Richard K. Lyons & Sergio Schmukler, 2000.
"Managers, Investors, and Crises: Mutual Fund Strategies in Emerging Markets,"
NBER Working Papers
7855, National Bureau of Economic Research, Inc.
- Kaminsky, Graciela & Lyons, Richard K. & Schmukler, Sergio L., 2004. "Managers, investors, and crises: mutual fund strategies in emerging markets," Journal of International Economics, Elsevier, vol. 64(1), pages 113-134, October.
- Kaminsky, Graciela & Lyons, Richard & Schmukler, Sergio, 2000. "Managers, investors, and crises : mutual fund strategies in emerging markets," Policy Research Working Paper Series 2399, The World Bank.
- Calvo, Guillermo A. & Mendoza, Enrique, 1997.
"Rational Herd Behavior and the Globalization of Securities Markets,"
97-26, Duke University, Department of Economics.
- Guillermo A. Calvo & Enrique G. Mendoza, 1997. "Rational herd behavior and the globalization of securities markets," Discussion Paper / Institute for Empirical Macroeconomics 120, Federal Reserve Bank of Minneapolis.
- Jeffrey A. Frankel and Sergio L. Schmukler., 1997.
"Country Funds and Asymmetric Information,"
Center for International and Development Economics Research (CIDER) Working Papers
C97-087, University of California at Berkeley.
- Jeffrey A. Frankel & Sergio L. Schmukler, 1998. "Country Funds and Asymmetric Information," International Finance 9805003, EconWPA.
- Frankel, Jeffrey A. & Schmukler, Sergio L., 1998. "Country funds and asymmetric information," Policy Research Working Paper Series 1886, The World Bank.
- Frankel, Jeffrey A. & Schmukler, Sergio L., 1997. "Country Funds and Asymmetric Information," Center for International and Development Economics Research, Working Paper Series qt2791c3wm, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Kaminsky, Graciela L. & Reinhart, Carmen M., 2000.
"On crises, contagion, and confusion,"
Journal of International Economics,
Elsevier, vol. 51(1), pages 145-168, June.
- Anne C Jansen & Donald J Mathieson & Barry J. Eichengreen & Laura E. Kodres & Bankim Chadha & Sunil Sharma, 1998. "Hedge Funds and Financial Market Dynamics," IMF Occasional Papers 166, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2529. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.