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FUM size not a forecast for returns

FUM size not a forecast for returns

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By tstewart ·
November 16 2016

FUM size not a forecast for returns

A study conducted by the Centre for International Finance and Regulation (CIFR) suggests there is little reason to believe small fund managers will perform their larger peers.

The CIFR research paper, titled Capacity Management for Institutional Asset Owners, has cast doubt on the notion that fund manager scale is an important factor when it comes to performance.

The study found that the size of funds under management (FUM) may not have a relationship with performance.

Study co-author Geoff Warren said size and capacity is best viewed as a "horses for courses" issue.

"An optimal scale need not exist for asset owners that run multi-asset portfolios," Mr Warren said.

"Instead, large asset owners should target different asset classes and strategies than those with smaller FUM. Both where and how a fund invests should evolve as it grows."

The study suggests that asset owners should focus their attention on where the balance between return opportunities and capacity is most appropriate for their size.


"Small funds can use their ability to be nimble and pick up opportunities that are insignificant to larger players, such as small-cap equities," said the paper.

"Large funds should do better in large markets where size provides a competitive advantage via the ability to provide substantial capital supported by considerable organisational resources."

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