Redemption constraints of Brazilian equity funds, liquidity of assets and performance

• Main Authors: Dermeval Martins Borges Junior, Rodrigo Fernandes Malaquias
• Format: Article
• Language: English
• Published: Fundação Getulio Vargas 2019-03-01
• Series: RAE: Revista de Administração de Empresas
• Subjects: Redemption constraints; portfolio liquidity; performance; equity funds; investment funds
• Online Access: http://www.scielo.br/pdf/rae/v59n1/en_0034-7590-rae-59-01-0043.pdf

This paper analyzed the relation between redemption constraints and liquidity of portfolios under management of Brazilian equity funds, as well as its effect on performance. The sample included 2,706 Brazilian equity funds with investments in stocks listed on BM&FBovespa or in shares of other equity funds in the period between 2009 and 2016. The data were analyzed through descriptive statistics and linear regressions with panel data. The results indicated that redemption constraints positively impact equity funds performance. In addition, the results also suggested that liquidity constraints allow the funds to exploit less liquid investments in stocks and shares of other funds. When verifying if investments in low liquidity assets by equity funds imply superior performance from liquidity premia, the results did not indicate a positive effect.