Self-Inflated Funds
Key Insights
- When funds with illiquid portfolios grow rapidly without rebalancing into more liquid assets, they generate self-inflated returns via their own price impact.
- Investors chase these returns, triggering a positive feedback loop that inflates both fund size and asset prices.
- We introduce a simple measur.
Show formatted citation
@misc{ acaciamarkets-research-self-inflated-funds,
title = { Self-Inflated Funds },
author = { SSRN },
year = { 2026 },
url = { https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4834390 },
note = {Summarized and classified by AcaciaFund}
}
TY - GEN TI - Self-Inflated Funds AU - SSRN PY - 2026 UR - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4834390 ER -
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Overview
When funds with illiquid portfolios grow rapidly without rebalancing into more liquid assets, they generate self-inflated returns via their own price impact. Investors chase these returns, triggering a positive feedback loop that inflates both fund size and asset prices. We introduce a simple measure - fund illiquidity - that captures a fund’s potential for return inflation.
Using daily ETF data, we estimate price impact, decompose returns, and show that investors chase both fundamental and self
Key Topics
- Market Microstructure: A theme covered by this item within the markets context.
- Macro Finance: A theme covered by this item within the markets context.
Why It Matters
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Key Takeaways
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