Ch.11 · Comparing Fund Performance · hard
What does it indicate if a debt fund's AUM falls sharply in a short period without a corresponding fall in NAV?
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EXPLANATION
A sharp AUM drop without NAV decline indicates large outflows (redemptions). For debt funds holding illiquid instruments, this can force the manager to sell liquid assets first, leaving the portfolio with a higher concentration of illiquid/lower-quality bonds — increasing risk for remaining investors.
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