In the Margins

NY Fed staffers: Funds vulnerable to runs

February 18, 2016

By Bloomberg

Three Federal Reserve Bank of New York staffers have written in a blog post that mutual funds are vulnerable to runs that can spill over and cause problems in the broader financial system. Nicola Cetorelli, Fernando Duarte and Thomas Eisenbach said a run could occur if heavy withdrawals from a mutual fund were to cause the fund company to sell illiquid assets at fire sale prices. In that situation, they wrote, investors would have an incentive to get their money out early, triggering a race for the door that could have a ripple effect beyond the original fund. Read the original story from Bloomberg.

 

 

 

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