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Fabio Cortes and Luca Sanfilippo
Emerging economies in the post-crisis period increasingly saw portfolio debt inflows from a type of large international investment fund: Multi-Sector Bond Funds (MSBFs). These investors have lacked adequate representation in the literature. This paper constructs a new detailed database from micro-level MSBF emerging market (EM) holdings from 2009:Q4–2018:Q2. Exploiting this data, the paper assesses the risks they pose to the financial stability of specific emerging bond markets. The data shows that MSBFs are highly concentrated–both in their positions and their decision-making. The empirical results further suggest that MSBFs exhibit opportunistic behavior (and more so than other investment funds). In periods of high risk aversion, large MSBF portfolio reallocations out of EMs can be associated with underperformance of the same markets, signaling the importance of monitoring their footprint and better understanding their asset allocation decisions.
Fabio Cortes and Luca Sanfilippo

about 60 percent of all EM bond investments by MSBFs. Much like at the individual fund level, the concentration in investment decisions contrasts with EM-dedicated bond funds where there is less activism, and a more even distribution of assets across fund manager groups. Concentration in the markets of a few recipient economies MSBFs are highly concentrated investors in the markets of a few recipient economies . While MSBFs are investing in a greater number of countries and EM portfolio debt inflows are getting more geographically dispersed, the fixed income