The International Monetary Fund's warning that open-ended funds pose a systemic risk to financial markets are based on “hypothetical and erroneous assumptions”, say two influential asset management trade bodies.

The IMF's 4 October blog post outlined a flurry of risks to the global $41tn sector — noting that open-ended funds holding hard-to-sell assets can “magnify the impact of shocks”, while  those investing in less-liquid assets that can take days to sell risk a “liquidity mismatch” where a wave of investors rush for the exit all at once. The IMF's warnings come amid mounting investor withdrawals as central banks take action to tackle soaring inflation.