Abstract
Studies of bilateral portfolio holdings typically consider investment fund shares as equity instruments, failing to take into consideration the true exposures of investors. Using detailed information of euro area investment fund assets, estimates of actual euro area investors' exposures are determined, at the sectoral level, expunging the bias introduced by investment funds. These estimates unveil a different instrument composition with a higher proportion of exposure to debt securities, a higher level of cross-border financial positions and lower home bias, and, in particular, a higher exposure to other advanced economies. In this sense, investment funds can be seen as vehicles for the portfolio diversification of domestic euro area investors.
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