Liquidity Transformation in Asset Management: Evidence from the Cash Holdings of Mutual Funds. Adi Sunderam, July 21, 2015, Paper. “Using a novel data set on the cash holdings of mutual funds, we show that cash plays an important role in how mutual funds provide liquidity to their investors. Rather than transacting in equities or bonds, mutual funds use cash to accommodate inflows and outflows. This is particularly true for funds with illiquid assets and at times of low aggregate market liquidity. We show that economies of scale in liquidity provision are limited for mutual funds. Mutual funds are large holders of cash in the aggregate…Link