Redemption in Kind and Mutual Fund Liquidity Management

Abstract Open-end mutual funds can use redemption in kind to satisfy investor redemptions by delivering securities instead of cash. We find that reserve their rights redeem experience less after poor performance. Evidence from actual in-kind transactions reveals several unique mechanisms for mitigate fund runs, including the delivery more illiquid stocks and with greater tax overhang. Funds suffer adverse impact outflows on However, redeeming investors bear significant liquidation costs when they sell securities, associated destabilization prices these securities. Authors have furnished an Internet Appendix, which is available Oxford University Press Web site next link final published paper online.