FEDS Note: Liquidity Transformation Risks in U.S. Bank Loan and High-Yield Mutual Funds: A 2026 Update

Kenechukwu Anadu, Sean Baker, Fang Cai, Logan George, and Erik LarssonMutual funds (MFs) and other open-ended collective investment funds engage in liquidity transformation—they offer investors daily redemptions while investing in assets that may take longer than a day to sell without significant price impact. This…