Size of a Mutual Fund

POSTED BY PK ON July 24, 2012 5:22 am COMMENTS (2)

Hi,

I was just going through an article,

http://economictimes.indiatimes.com/personal-finance/mutual-funds/analysis/is-your-mutual-fund-too-big-to-deliver-good-returns/articleshow/15078282.cms?curpg=3

Looks like HDFC TOP 200 is on top on the list and off late is definitely facing issue in its returns.
What is your opinion on the same?

Regards,
PK

2 replies on this article “Size of a Mutual Fund”

  1. BanyanFA says:

    PK,
    I think if a fund is of small size, it should be definitely attract some attention as smaller funds don’t enjoy economies of scale and efficient allocation of funds.

    On the contrary, if the funds grow beyond a particular size, it doesn’t necessarily mean that its growth trajectory should be questions. For a small cap fund, this may be the case considering that the total market cap of all the companies in which the fund would invest may end up being acquired by the fund – which is not desirable as it would result in all types of problems such as liquidity of investments, lack of further options to invest. However for a large cap / multicap fund, this should not be a problem.

  2. Atul says:

    Hi PK,

    I don’t think that size of the fund is the only restricting factor. Few years back Reliance growth fund had stopped accepting new subsrciptions due to size issue, but still performing well.

    Secondly you cannnot rate fund on smaller horizon. You need to have at least more than 5 years horizon for evaluation

    Regards

    Atul

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