Penalty fears drove US funds’ March run – NY Fed paper

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A recent paper finds that institutional investors in US dollar money market funds led a run during the initial phase of the Covid-19 pandemic. These investors feared that decreasing liquidity might lead the fund managers to penalise or restrict withdrawals.

The New York Fed paper, Sophisticated and unsophisticated runs by Marco Cipriani and Gabriele La Spada, examines investors’ behaviour during March 2020.

That month saw a short run on US dollar money market funds. In late March, the Federal

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