Premium
How Does Size Affect Mutual Fund Behavior?
Author(s) -
POLLET JOSHUA M.,
WILSON MUNGO
Publication year - 2008
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2008.01417.x
Subject(s) - closed end fund , fund of funds , open end fund , income fund , diversification (marketing strategy) , passive management , business , global assets under management , finance , mutual fund , sovereign wealth fund , portfolio , monetary economics , fund administration , institutional investor , economics , microeconomics , market liquidity , corporate governance , marketing , incentive
If actively managed mutual funds suffer from diminishing returns to scale, funds should alter investment behavior as assets under management increase. Although asset growth has little effect on the behavior of the typical fund, we find that large funds and small‐cap funds diversify their portfolios in response to growth. Greater diversification, especially for small‐cap funds, is associated with better performance. Fund family growth is related to the introduction of new funds that hold different stocks from their existing siblings. Funds with many siblings diversify less rapidly as they grow, suggesting that the fund family may influence a fund's portfolio strategy.