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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".
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Investopedia explains '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.
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