Portfolio Pumping in Mutual Fund Families
52 Pages Posted: 18 Mar 2017 Last revised: 17 Aug 2019
Date Written: May 30, 2018
I document portfolio pumping at the fund family level, a strategy that non-star fund managers buy stocks held by star funds in the family to inflate their performance at the quarter end. Families that heavily employ the strategy show strong evidence of inflated performance after 2002, when the SEC increased regulation on portfolio pumping at the fund level. Non-star fund managers pumping for star funds in the family receive 1.8% ($24 million) more inflows per quarter, conditional on the performance. Furthermore, pumping is concentrated in stocks that are buried deep down in the holdings of star funds.
Keywords: Mutual Funds, Portfolio Pumping, Family Strategy
JEL Classification: G18, G23, G28, K22
Suggested Citation: Suggested Citation