Working papers economics - Exploring the Flow-Performance Relation in Colombian Open-End Investment Funds
The series Working Papers on Economics is published by the Office for Economic Studies at the Banco de la República (Central Bank of Colombia). It contributes to the dissemination and promotion of the work by researchers from the institution. This series is indexed at Research Papers in Economics (RePEc).
On multiple occasions, these works have been the result of collaborative work with individuals from other national or international institutions. The works published are provisional, and their authors are fully responsible for the opinions expressed in them, as well as for possible mistakes. The opinions expressed herein are those of the authors and do not necessarily reflect the views of Banco de la República or its Board of Directors.
According to the findings, macro-financial variables significantly influence the dynamics of contributions and capital withdrawals, both in open mutual funds without permanence agreements that primarily invest in fixed-income securities and in those focused on equities.
Abstract
We provide the first comprehensive analysis of the flow-performance relation in Colombian open-end investment funds. We employ a rich dataset containing weekly information at the fund level, including balance sheets, portfolio holdings, liquidity indicators, capital flows, and returns, from January 2018 to December 2023. By analyzing fixed and variable-income funds separately, our empirical findings indicate that performance is relevant for the sensitivity of flows only in fixed-income funds. For these, outflows are more sensitive to poor performance than inflows to good performance. However, macro-financial variables significantly influence investing decisions for both fixed and variable-income funds.