cash holdings of german open-end equity strongfundsstrong does ownership.pdf

Discussion Paper Deutsche Bundesbank No 47/2013 Cash holdings of German open-end equity funds: Does ownership matter? Niko Dötz Mark Weth Discussion Papers represent the authors‘ personal opinions and do not necessarily reflect the views of the Deutsche Bundesbank or its staff. Editorial Board: Klaus Düllmann Heinz Herrmann Mathias Hoffmann Christoph Memmel Deutsche Bundesbank, Wilhelm-Epstein-Straße 14, 60431 Frankfurt am Main, Postfach 10 06 02, 60006 Frankfurt am Main Tel +49 69 9566-0 Please address all orders in writing to: Deutsche Bundesbank, Press and Public Relations Division, at the above address or via fax +49 69 9566-3077 Internet http://www.bundesbank.de Reproduction permitted only if source is stated. ISBN 978–3–86558– 9 82– 8 (Printversion) ISBN 978–3–86558– 9 83– 5 (Internetversion) Non-technical summary In the aftermath of the financial crisis, the discussion on the nature of runs on financial intermediaries has intensified, as have discussions on strategies to avoid runs. Holding liquidity can be one important element of a stabilization strategy. This paper explores the cash management conducted by German open-end equity funds for the period between 2005 and 2010. We analyse the cash response to mutual fund flows and capture effects related to ownership structures and asset liquidity. Thereby we complement earlier work which emphasizes the role of the investor base and portfolio liquidity conditions as determinants of mutual fund flows arising from strategic complementarities. We construct a unique data set by augmenting the German equity funds’ balance sheet statistics (Deutsche Bundesbank) with information on their investor base and their po