THE global fund management industry is a potential source of risk for emerging markets because of its vast size and herd-like investor behavior that can exacerbate asset price fluctuations, a latest report said late Sunday.

    The Bank for International Settlements (BIS) said the selloff that rocked emerging economies last year was a reminder of how “the activity of large asset managers can significantly affect small and illiquid asset markets.”

    The presence and influence of asset managers in emerging market economies (EME) has grown significantly, BIS said, citing data showing emerging bond funds alone had quadrupled assets under management (AUM) between 2007-2017.

    The total AUM of emerging market funds tracked by the EPFR Global consultancy had risen to US$1.4 trillion from US$900 million before the Lehman crisis, it added.

    While these amounts are dwarfed by the AUM of funds dedicated to the United States or Europe, they are large relative to emerging stock and bond markets.

    “The large size and concentration of AUM of asset managers in relatively small and illiquid EME asset markets are a potentially important source of concern,” BIS said.(SD-Agencies)