This paper analyzes the portfolio choices of a large sample of mutual funds in early 2020 and documents how the global fund industry changed the composition of financial investments in response to the Covid-19 pandemic.
Mutual funds have reduced their exposure to the countries and sectors most affected by the pandemic, in different ways depending on fund category, type of instrument, performance and the extent of outflows. The results of the work also document how monetary policy measures affected the behaviour of mutual funds and therefore support the hypothesis that there is an unconventional monetary policy transmission channel operating through non-bank financial institutions.
