Unconventional Monetary Policy and the Portfolio Choice of International Mutual Funds

By Gino Cendese (Fulcrum), Ilaf Elard

This paper analyses how unconventional monetary policy by the major central banks in developed markets affects the geographical portfolio choice of international mutual fund managers. We find that large-scale asset purchases have significant international spillover effects, in contrast to unconventional monetary policy announcement surprises. Specifically, we document that mutual fund managers rebalance their portfolios away from the developed country conducting large-scale asset purchases and towards other developed markets. We find little evidence for fund managers contributing to QE-induced capital flows to emerging markets.

To be published in: Journal of International Money and Finance