No. 1546 - Beyond the surface: investor base, risk-taking and fragility in open-end funds

Temi di discussione (Working papers)
by Valerio Della Corte, Raffaele Gallo, Taneli Mäkinen and Francesco Palazzo
October 2026
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This paper examines how an investment fund's investor base can affect its ability to cope with a sudden increase in redemptions. To this end, it exploits as a natural experiment the sharp decline in Italian government bond prices in 2018, which prompted Italian insurance companies to redeem shares in bond funds in order to mitigate the impact of the decline on their solvency ratios. As a result, these funds experienced liquidity pressures that were unrelated to their own performance.

Our analysis shows that funds with a predominantly long-term investor base were able to offset redemptions by Italian insurance companies by attracting new inflows, without changing the risk profile of their portfolios. By contrast, funds held mainly by short-term investors did not fully offset the redemptions and increased the riskiness of their assets, likely in an attempt to attract more performance-sensitive investors.

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  1. 20 October 2026
    No. 1546 - Beyond the surface: investor base, risk-taking and fragility in open-end funds
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