A0484
Title: Flow interdependence and systemic vulnerability in the U.S. mutual fund sector
Authors: Jie Yu - UCLA Anderson School of Management (United States) [presenting]
Antoine Bouveret - European Securities and Markets Authority (France)
Abstract: Mutual funds can amplify financial shocks through asset liquidation driven by simultaneous redemptions. A novel copula-based framework is introduced to model the joint distribution of mutual fund flows, explicitly capturing nonlinear and tail-dependent relationships across fund categories. A new metric is proposed, \textit{Flows in Distress (FiD)}, quantifying expected net outflows from a given fund category conditional on distress in another. Using U.S. mutual fund data spanning from 2000 to 2025, categories are identified that are particularly vulnerable to cross-fund spillovers and those acting as systemic transmitters during stress episodes. Additionally, the response of mutual fund flows is estimated to macro-financial shocks, demonstrating notable sensitivities to equity market volatility compared to Treasury market stress. Employing a Shapley value approach for systemic risk attribution, it is found that high-yield and world bond funds amplify systemic vulnerabilities, while investment-grade bond and hybrid funds generally mitigate redemption pressures, highlighting the nuanced roles different fund categories play during financial turmoil.
