Staff Reports
Sophisticated and Unsophisticated Runs
Number 956
December 2020 Revised May 2023

JEL classification: E41, G23, G28

Authors: Marco Cipriani and Gabriele La Spada

In March 2020, prime money market funds suffered heavy outflows. We show that institutional and retail investors behaved in dramatically different ways, consistent with different levels of sophistication: sophisticated institutional investors ran preemptively based on fundamentals, unsophisticated retail investors ran based on herd-like informational spillovers. Using the different regulatory treatment of onshore and offshore funds, we find that institutional investors fled from funds whose portfolio liquidity was close to the threshold for the imposition of redemption fees and gates. Retail investors left funds in fund families with large institutional presence and large institutional outflows. We show that within-family institutional outflows are informative to retail investors through a portfolio-similarity analysis, and using data on website traffic, we document institutional investors’ higher degree of information acquisition about fund portfolios, consistent with their outflows being informative to retail investors. Finally, both institutional and retail investors were influenced by the cost of switching to a safe investment option, with lower costs associated with higher outflows, suggesting that the availability of a safe haven in times of turmoil exacerbates runs.

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Marco Cipriani
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at

Gabriele La Spada
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper.
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