Publication of CSSF working paper “The impact of COVID-19 on large redemptions in the Luxembourg investment fund market”

The CSSF presents in this working paper an analysis on large daily and weekly net redemptions in the Luxembourg investment fund industry. The paper relies on an original dataset compiled since March 2020, at the peak of the COVID-19 crisis, up to December 2020 over the funds managed by the largest investment fund managers in Luxembourg and on fund specific supervisory data from the Luxembourg-specific UCITS Risk Reporting and the EU AIFM Reporting. It investigates whether the large net redemptions are associated with fund characteristics such as leverage, portfolio liquidity, size and past performance. The COVID-19 context allows to contrast the crisis specific features of these redemptions by comparing the March subset to the “back-to-normal” April-to-December subset. It finally documents the use of Liquidity Management Tools (LMTs) by funds facing large redemptions, and correlates it to fund-specific risk drivers and to the size of net redemptions.