The International Monetary Fund (IMF) reported that institutional investors increase fluctuations in the corporate bond market through strongly trading.
The International Monetary Fund has argued that the growing volatility is particularly blatant during stress times in the market when instability often bleeds into real effects of borrowers for companies and investors in their debts.
International Monetary Fund analysis It is one of the first reports to study the effect of the increasing institutionalization of the American ETF industry. It also explores the various investor profiles from the traded investment funds and fluctuating the securities they hold. The research highlighted that the institutional property of the institutions of institutional bonds listed in the United States increased from 44 % in 2012 to 70 % in 2025.
The International Monetary Fund says institutional investors increase the volatility of corporate bonds
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For each International Monetary Fund pic.twitter.com/pwsfbgtz7w
– Melody Wright (@m3_meody) March 25, 2025
The International Monetary Fund analysis (IMF) revealed that institutional investors increase the fluctuations of the corporate bond market. The International Monetary Fund believes that investors feed fluctuations by trading in funds (ETFS).
The Finance Agency also argued that increasing fluctuations was especially common during times of uncertainty in the market. The International Monetary Fund stated that market stress occurs when instability flows into traces in the real world of borrowers for companies and investors in their debts.
“Investment funds circulating in the United States show companies with a high share of institutional property larger trading volumes during periods of tension.”
International Monetary Fund (International Monetary Fund).
The financial company has suggested that institutional investors use investment funds circulating for risk management and liquidity shocks that are achieved during stress periods, which are then transferred to the basic market. Investment funds circulated to $ 15 trillion in assets, an increase of five times in a decade and a way higher than $ 4.5 trillion in hedge funds.
The agency’s research highlighted that the growth of the traded investment funds, at the expense of traditional traditional investment funds, has reduced the fluctuations in the corporate bond market. The company strengthened it to the belief that “the guaranteed recovery of shares of joint investment funds in the net value of the fund can stimulate operational behavior by investors.”
The International Monetary Fund noted that joint investment funds suffered from average net flows of 10 % of their assets during normal disorders in February and March 2020, which exacerbated the continuous market sale. The company also said that the recovery operations of traded investment funds do not necessarily lead to fire sales in basic bonds. The agency argued that market makers that investment funds circulating in services may instead circulate “eyes”, which take bonds to their public budgets and temporarily protect the market from full impact.
ETFS has the largest share of corporate bonds
The analysis indicated that the highest ETF ownership share may be associated with reducing bond yield fluctuations. There was a difference between the behavior of institutional investors and retail investors and their impact on the market. The International Monetary Fund has also argued that the fluctuation tends to be higher when the founding investors have a greater share of bonds through the boxes circulating on the stock exchange.
The increase of 1 ° C in the share of the bonds kept by the ETF retail investors is associated with a decrease of 85 basis points in the volatility. The research found that increasing the ratio of 1 Celsius in the share held by the ETF institutional investors led to an increase of 27 basis in the volatility. The researchers pointed out that “the role of institutional investors is enlarged during periods of stress.”
The International Monetary Fund stated that trading within today in traded investment funds encourage institutional investors in the short -term most aggressive term who are more likely to sell during periods of tension, while institutions are likely to take short sites in the investment funds circulating in the bonds.
Three American business colleges revealed in 2023 that fixed -income investment funds can drain liquidity from corporate bonds during market stress, which may get worse in prices during crises.
The agency also believes that the markets are more liquid than the fluctuations caused by institutional institutional investors in the investment funds market circulating in the corporate bond market in government bonds or stocks.
A research By Associate Professor of Finance at Anderson College at the University of California, Los Angeles, Valentin Haddad found in 2022 that the high negative investment in the investment funds circulated in the circulating investment funds were distorting price signals and paying the US stock market fluctuation.
Kenneth Lamont, director of research at Mooringstar, said that it is not surprising that we hear that advanced investors were more likely to use investment funds circulating in the tactic and that they lead to higher levels of trading than retailers.
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