Prepared by Margherita Giuzio, Christoph Kaufmann and Ellen Ryan This box examines the response of the investment fund sector to monetary policy shocks and the implications of this for financial stability. The investment fund sector has more than doubled in size since the global financial crisis. As the sector grows, so does its importance for the funding of economic activity and the transmission of monetary policy. But excessive risk-taking by funds can also have damaging effects for the wider financial system when it contributes to high levels of corporate leverage or when risky asset holdings need to be unwound quickly in times of market stress, as occurred in March 2020.