Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Larger funds have issues that smaller funds don't - that's clear. Beyond that, the article is replete with anecdotal evidence and misleading figures.
The average size of a top 100 fund has increased 62% since 2008. What's that mean? Is it taking the average size of the 100 largest funds at the end of 2008 and comparing that with the average size of the 100 largest funds now? That's two different sets of funds, and overstates the growth of the 2008 largest funds. (That's significant, since the point of this "statistic" was to show that large funds grow even larger.) And what's 62% anyway? VFINX (Vanguard 500) has grown 72% in value alone over the same time, so these other funds would appear to be underperforming and/or seeing outflows. What's the point of this figure again?
It talks about PIMCO Total Return, as though one fund proves some point. Okay, let's look at this fund. It says that this fund has $244B, and that its ER is 0.90% (implying that it takes in 0.90% * $244B/year in fees). Apples and oranges. The $244B is for the fund (all share classes); the 0.90% is for the A shares. Anybody here paying 0.90%? (D shares cost 0.75%, and except for back loaded shares [B,C] and R shares, all the other share classes - the major ones like Institutional, D, etc. cost less.)
More to the point is that this fund has been managed top down for many years - Gross issues "proclamations" on trends. Its success has been based more on macro moves and a greate ability to move in and out of markets without disrupting them. For this fund, it's that latter factor that could be an issue with size. And that's not the reason it did poorly last year - the reason was that Gross made terrible calls. Size had little if anything to do with it.
And that's the problem with using anecdotal data. You live by it, you die by it. Pick anecdotes, and each will have its own special factors, so it fails to support the general thesis. The article ends with Magellan, noting that it is now a "mere" $15B fund. Yet with all of Fidelity's resources behind it, and the fact that when Fidelity assigns a new manager to a fund the manager has the freedom to overhaul the fund, the article still wonders whether it will succeed - demonstrating (anecdotally) that size has little to do with it.
Comments
The average size of a top 100 fund has increased 62% since 2008. What's that mean? Is it taking the average size of the 100 largest funds at the end of 2008 and comparing that with the average size of the 100 largest funds now? That's two different sets of funds, and overstates the growth of the 2008 largest funds. (That's significant, since the point of this "statistic" was to show that large funds grow even larger.) And what's 62% anyway? VFINX (Vanguard 500) has grown 72% in value alone over the same time, so these other funds would appear to be underperforming and/or seeing outflows. What's the point of this figure again?
It talks about PIMCO Total Return, as though one fund proves some point. Okay, let's look at this fund. It says that this fund has $244B, and that its ER is 0.90% (implying that it takes in 0.90% * $244B/year in fees). Apples and oranges. The $244B is for the fund (all share classes); the 0.90% is for the A shares. Anybody here paying 0.90%? (D shares cost 0.75%, and except for back loaded shares [B,C] and R shares, all the other share classes - the major ones like Institutional, D, etc. cost less.)
More to the point is that this fund has been managed top down for many years - Gross issues "proclamations" on trends. Its success has been based more on macro moves and a greate ability to move in and out of markets without disrupting them. For this fund, it's that latter factor that could be an issue with size. And that's not the reason it did poorly last year - the reason was that Gross made terrible calls. Size had little if anything to do with it.
And that's the problem with using anecdotal data. You live by it, you die by it. Pick anecdotes, and each will have its own special factors, so it fails to support the general thesis. The article ends with Magellan, noting that it is now a "mere" $15B fund. Yet with all of Fidelity's resources behind it, and the fact that when Fidelity assigns a new manager to a fund the manager has the freedom to overhaul the fund, the article still wonders whether it will succeed - demonstrating (anecdotally) that size has little to do with it.