Fund size: Why bigger is rarely better

It is one of the great paradoxes in fund management that success often leads to disappointment. Top-performing managers understandably get a lot of attention from investors and advisers, and inflows duly follow – especially if the fund in question has a strong marketing effort behind it. Unfortunately, every fund has (or at least, should have) a capacity limit. The bigger the sum of money under management, the harder it is for managers to get access to less liquid areas of the market. If, for example, a manager excels at picking sub-£100m companies but runs in excess of £3bn, they wou...