Swing Pricing and Fragility in Open-End Mutual Funds

Abstract How can fragility be averted in open-end mutual funds? In recent years, markets have observed an innovation that changed the way funds are priced. Alternative pricing rules (known as swing pricing) adjust funds’ net asset values to pass on trading costs transacting shareholders. Using unique data investor-level transactions U.K. corporate bond funds, we show eliminates first-mover advantage arising from traditional rule and significantly reduces outflows during market stress. Swing also concavity flow-performance relationship dilution fund performance.