Portfolio Pumping and Managerial Structure

Patel, Saurin; Sarkissian, Sergei

doi:10.1093/rfs/hhaa027

Cited by 18 publications

(1 citation statement)

References 36 publications

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“…Notably, the former have higher ESG portfolio and Globes scores and lower past returns. Like Patel and Sarkissian (2021), we document that funds run by management teams are on average larger but belong to smaller fund families, are cheaper, and have lower turnover than funds run by solo managers. The empirical tests rely on the subsample of solo-managed funds because there is less ambiguity as to who makes the decisions in these funds (Chevalier & Ellison, 1999).…”

Section: Datamentioning

confidence: 75%

Millennial managers

Luu,

Rubio

2023

Corporate Governance

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Research Question/IssueThis paper investigates whether and how millennial mutual fund managers differ from managers born in other generations in terms of environmental, social, and governance (ESG) orientation in portfolio choices and voting decisions.Research Findings/InsightsWe find that millennial mutual fund managers hold portfolios that are more ESG oriented than do managers from other generations, consistent with anecdotal evidence suggesting that millennials are more driven by purpose than profits. Our findings suggest that the observed relationship is stronger when managers have more discretion over portfolio choices, that is, in active funds and funds with lower flow‐performance sensitivity. Furthermore, we find that millennial managers respond more strongly to social movements by reallocating assets into more socially conscious firms. We also find that millennial managers are more supportive of environmental proposals when their outcome is contested.Theoretical/Academic ImplicationsOur paper shows how cultural, political, and economic events, including social movements experienced by people of the same age cohort, shape preferences and beliefs and result in different investment strategies and voting among mutual fund managers. We also show how institutional constraints might limit managers' ability to impose their own preferences when investing or voting their shares.Practitioner/Policy ImplicationsMillennials are increasingly replacing older generations in managerial roles and investing in the stock market due to wealth transfers from their parents. This study offers insights to policymakers and investors interested in understanding the drivers of ESG investment.

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Section: Datamentioning

confidence: 75%

Millennial managers

Luu,

Rubio

2023

Corporate Governance

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Do ESG funds engage in portfolio pumping to gain higher flows? An application of Benford's Law

Mallios,

Mavruk

2024

Int. J Fin Econ

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Portfolio pumping is identified as an ‘illegal’ trading practice that involves inflating quarter‐ and year‐end portfolio returns. Utilizing U.S. domestic equity mutual fund daily return data, we examine whether environmental, social, and governance (ESG) funds engage in portfolio pumping to generate higher flows. Our findings reveal that, on average, ESG funds attract 0.4% higher flows than other funds. However, they engage in portfolio pumping and achieve returns that are 5.3 basis points (bps) higher at quarter ends compared to their returns during the rest of the year. This practice does not result in additional fund flows. Notably, compared to other funds, ESG funds exhibit a significant 4 bps reduction through portfolio pumping. This implies that, on the last day of the quarter, ESG funds earn approximately 4 bps lower returns compared to other funds. Portfolio pumping is costly for both investors and financial markets since it leads to trading activities that cause stock prices to deviate from their fundamental values. ESG funds engage less in portfolio pumping than other funds, which indicates that their primary focus is to maximize fund flows rather than enhance or create a positive social impact on the underlying firm portfolio. Investors seem to understand this goal, particularly when ESG funds engage in portfolio pumping and avoid investing in ESG funds.

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Partial portfolio disclosure, investors’ attention, and window dressing

Guo

2023

China Journal of Accounting Research

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Portfolio Pumping and Managerial Structure

Cited by 18 publications

References 36 publications

Millennial managers

Millennial managers

Do ESG funds engage in portfolio pumping to gain higher flows? An application of Benford's Law

Partial portfolio disclosure, investors’ attention, and window dressing

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