Blaming open-end funds for liquidity shocks is closed thinking

Controversial proposals to overhaul how funds manage liquidity risk are based on a fallacy, writes Eric Pan

In testimony to the US Senate last month, SEC chair Gary Gensler said phone calls from mutual fund managers allegedly requesting a bailout in March 2020 served as the main justification for the agency’s swing pricing and liquidity risk management proposals.

Here’s the problem with that: industry groups strongly deny that fund managers made any such calls.

This sort of false narrative crops up time and again in policy discussions about the impact of non-bank financial intermediation (NBFI) on