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Liquidity Transformation Risks in U.S. Bank Loan and High-Yield Mutual Funds: a 2026 Update
We update the mutual fund (MF) liquidity monitoring metrics introduced by Anadu and Cai (2019). We show that the median liquidity ratio for bank loan (BL) MFs has remained relatively stable in recent years, while the median illiquidity ratio is near levels last observed during the pandemic. This dynamic suggests increased liquidity transformation risk, on balance. To be sure, our measure captures only one dimension of illiquidity, rather than the full illiquidity profile of an MF’s portfolio.