We examine the role of asset liquidity in explaining the strategic redemption decisions of open-end bond fund investors. In the U.S., bond mutual funds have a concave relation between flow and performance. However, why we observe this phenomenon is less clear. While Chen, Goldstein, and Jiang (2010) provide rich predictions on the role of investor payoff complementarities in a fund run, no clear causal links have been established. In this paper, we identify an exogenous shock to the liquidity of the Chinese bond market that affects the level of complementarities, and this change helps us evaluate the causal impact of the underlying asset market liquidity on investor flow decisions. Using this setup, first, we demonstrate that in China, where the overall bond market liquidity is higher, bond funds have a convex flow-performance relation. Second, we show causal evidence that when the advantage of frontrunning other inverstors is removed, the sensitivity of outflows to poor fund performance significantly diminishes. Overall, our  evidence documents that the illiquidity of corporate bonds and consequent payoff complementarities generate a first-mover advantage in a fund run, particularly among investors in illiquid U.S. bond funds.