Portfolio Pumping in Mutual Fund Families
55 Pages Posted: 18 Mar 2017 Last revised: 13 Oct 2023
Date Written: May 30, 2018
This paper investigates portfolio pumping at the fund family level, where non-star fund managers strategically purchase stocks held by star funds in the family to inflate their quarter-end performance. Star funds engage in such activities show inflated performance after 2002, when the Securities and Exchange Commission increased regulation on portfolio pumping at the fund level. Stocks pumped by the strategy show strong reversals at quarter-end. Moreover, despite a minor underperformance stemming from portfolio misallocation, non-star fund managers pumping for star funds receive abnormally high subsequent flows, suggesting a pattern of family subsidization.
Keywords: Mutual Funds, Portfolio Pumping, Family Strategy
JEL Classification: G18, G23, G28, K22
Suggested Citation: Suggested Citation