Procyclical Asset Management and Bond Risk Premia

We use unique institutional securities holdings data to examine the trading behaviour of delegated capital and its impact on bond risk premia. show that fund managers trade strongly procyclically: they actively move into higher yielding, longer duration lower rated as yields fall spreads compress, vice versa. Funds more exposed negative increase their risk-taking strongly, this effect is particularly pronounced for those offering explicit minimum return guarantees. Institutional funds' investments have large persistent price in both corporate sovereign markets. provide evidence procyclical driven by career concerns among managers. JEL Classification: G11, G23, E43