Do ESG fund managers pump and dump the stocks in their portfolios? European evidence

Spyros Papathanasiou, Dimitris Kenourgios and Drosos Koutsokostas ()
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Drosos Koutsokostas: National and Kapodistrian University of Athens

Journal of Asset Management, 2024, vol. 25, issue 3, No 3, 245-260

Abstract: Abstract We investigate portfolio pumping around quarter-ends by ESG equity mutual funds domiciled in the largest European markets in sustainable investments, i.e., the UK, France and Germany, for the period from January 2010 to December 2022. We find strong evidence that the UK funds inflate quarter-end returns, with price spikes being stronger at year-ends; nevertheless, the magnitude of price inflation is less than that of their conventional counterparts. On the contrary, results indicate that German and French funds do not engage in portfolio pumping. The COVID-19 pandemic strengthened the propensity of fund managers to cause a profound artificial enhancement to the performance of the investment portfolio. Further analysis shows that portfolio pumping is more prominent among the worst-performing funds, funds that charge investors with lower fees and achieve a poor ESG rating. However, managers that pump fund returns do not attract significantly more flows. Our results have produced valuable insights for regulators and investors participating in ESG markets, highlighting the necessity for a rigorous surveillance of the UK ESG equity market.

Keywords: ESG equity mutual funds; Portfolio pumping; Turn-of-quarter effect; ESG score; COVID-19 (search for similar items in EconPapers)
JEL-codes: G11 G12 G23 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1057/s41260-024-00351-6

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