Portfolio Pumping

DEFINITION of 'Portfolio Pumping'

The illegal act of bidding up the value of a fund's holdings right before the end of a quarter, when the fund's performance is measured. This is done by placing a large number of orders on existing holdings, which drives up the value of the fund.

Also known as "marking the close".

BREAKING DOWN 'Portfolio Pumping'

Portfolio pumping can be highly destructive for investors in the fund because it is a temporary gain and the stocks will generally fall back to previous levels once the price manipulation is over. For example, if a fund has 1,000 shares of ABC purchased for $10 per share, if the shares are trading at $9 right before the managers' performance is measured, they will have performed poorly. As a result, the managers may resort to portfolio pumping and place enough orders to bid the price to $14, dramatically increasing the fund's performance. However, it is likely that the shares will fall back towards $9, leaving investors with a $9 stock that was made to look like a $14 stock.

RELATED TERMS
  1. Closed To New Investors

    Mutual funds and hedge funds that do not accept investments from ...
  2. Holdings

    The contents of an investment portfolio held by an individual ...
  3. Value Fund

    A stock mutual fund that primarily holds stocks that are deemed ...
  4. Incubation

    A trial process in which a fund company operates a number of ...
  5. Exchange Fund

    A stock fund that allows an investor to exchange his or her large ...
  6. Closed To New Accounts

    When an investment vehicle is no longer accepting new investors, ...
Related Articles
  1. ETFs & Mutual Funds

    5 Characteristics of Strong Mutual Fund Shares

    Discover some of the basic characteristics shared by good mutual funds that investors can use to help them in selecting funds.
  2. Managing Wealth

    How Mutual Fund Managers Pick Stocks

    Learn about how mutual fund managers choose stocks based on the type of funds they manage and the investment goals of the funds' shareholders.
  3. ETFs & Mutual Funds

    NPFCX, TWEBX: Expensive Global Mutual Funds Worth Your While

    Learn about three expensive global mutual funds that offer attractive features to investors. These funds have good historical performance results.
  4. ETFs & Mutual Funds

    When To Sell A Mutual Fund

    Unhappy with your mutual fund's returns and thinking of investing elsewhere? Read this article first.
  5. ETFs & Mutual Funds

    Mutual Funds

    What mutual funds are: Professionally managed pools of stocks, bonds and/or other instruments that are divided into shares and sold to investors. Pros: Diversification; liquidity; simplicity; ...
  6. ETFs & Mutual Funds

    Make Sure You Avoid Adding These Mutual Funds to Your 401(k)

    Find out which five types of mutual funds you should avoid in your 401(k), including why buying this year's hottest fund is likely a losing bet.
  7. ETFs & Mutual Funds

    The 4 Best American Funds for Growth Investors in 2016

    Discover four excellent growth funds from American Funds, one of the country's premier mutual fund families with a history of consistent returns.
  8. ETFs & Mutual Funds

    The Top 5 All Cap Core Mutual Funds for 2016

    Learn how to shop for the best all-cap mutual funds, and identify five funds that invest in companies of all sizes and offer good returns with low expenses.
  9. ETFs & Mutual Funds

    Top 5 American Funds for Retirement Diversification in 2016

    Discover five mutual funds from industry leader American Funds with high yields that are perfect for retirement savings diversification.
  10. ETFs & Mutual Funds

    The 3 Best American Funds for the Income Seeker in 2016

    Learn about American Funds' mutual fund offerings, their past performance compared to peers and three American funds to consider for income investors.
RELATED FAQS
  1. What is a mutual fund's NAV?

  2. How are the shares of a index fund created?

    When a firm creates an index fund and the shares have been allocated, are the number of shares fixed? Can the company continually ... Read Answer >>
  3. How often should I be checking the NAV of my mutual fund shares?

    Learn why the net asset value (NAV) of a mutual fund should be monitored regularly and understand the reasons why you should ... Read Answer >>
  4. Can an open-ended fund's price appreciate significantly?

    Theoretically, open-end mutual fund prices can experience a significant increase in price. However, three factors need to ... Read Answer >>
  5. How do I judge a mutual fund's performance?

    Evaluate mutual fund performance utilizing resources such as Morningstar; compare the fund with others in its peer group ... Read Answer >>
  6. What is the difference between a blend fund and a balanced fund?

    As both "blend"and "balanced" describe the particular asset mix of mutual funds, determining the exact distinctions between ... Read Answer >>
Hot Definitions
  1. Poison Pill

    A strategy used by corporations to discourage hostile takeovers. With a poison pill, the target company attempts to make ...
  2. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  3. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  4. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  5. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  6. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
Trading Center