Portfolio Pumping and Managerial Structure

Internal governance mechanisms and operational performance: Evidence from index mutual funds

Saurin Patel and Sergei Sarkissian

The Review of Financial Studies, 2021, vol. 34, issue 1, 194-226

Abstract: Using U.S. equity mutual fund data, we show that portfolio pumping—an illegal trading activity that artificially inflates year- and quarter-end portfolio returns—is more pronounced among single-managed funds compared with team-managed ones. The return inflation by team-managed funds is 45% lower than by single-managed funds at year-ends. Also, portfolio pumping decreases as team size increases. These results are driven by peer effects among teams and, sometimes, amplified by less convex flow-performance relation in team-managed funds. Our findings are robust to differences in fund governance, manager career concerns, local networks, fund family policies, and changes in the SEC’s enforcement policies.

JEL-codes: D70 G23 K22 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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