Would a mutual fund manager to better with $1 billion or $100 million?
 

I was talking to someone at work about this today, and to me, it seemed to make sense that the same manager would have better results with the smaller fund, as it would allow him to be more agile as well as put more into what he considers his best options. Versus for a larger fund, it becomes more similar to an index and thus is handicapped by its size.

However, the person I work with disagreed and said that there's no evidence, and no reason to believe that.

I think my position makes sense, but can anyone else explain why either way?

thanks,

jeff

Re: Would a mutual fund manager to better with $1 billion or $100 mill
 

Of course you're right. Anyone that suggests you're wrong is insane.

Re: Would a mutual fund manager to better with $1 billion or $100 mill
 

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Of course you're right. Anyone that suggests you're wrong is insane.

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yea that's what i thought. it's just that this guy has spent 25+ years in hedge funds and trading and i consider him smart, that gave me some second thoughts.

Re: Would a mutual fund manager to better with $1 billion or $100 mill
 

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Of course you're right. Anyone that suggests you're wrong is insane.

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yea that's what i thought. it's just that this guy has spent 25+ years in hedge funds and trading and i consider him smart, that gave me some second thoughts.

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Well, let's take his statement step by step. He said two things: (1) there's no evidence (2) there's no reason to believe it.

1: I have no idea if there's evidence. I'm not an academic researcher, so this really isn't something I would know.

2: There is absolutely reason to believe this. Very simply, you need fewer good ideas with 100 million than you do with 1 billion. A $1 billion portfolio is clearly going to bring in liquidity concerns when buying most securities. Not that it's proof, nor is it a reason to believe anything necessarily, but Buffett has made comments to the effect of promising he could return 50% on a million dollar portfolio. Obviously he doesn't do that on however many billions he has in his actual portfolio at Berkshire. The differences would obviously be less on the amounts you mentioned, but the same principles are going to hold true.

Re: Would a mutual fund manager to better with $1 billion or $100 mill
 

I cant believe someone in the industry would argue the bigger fund. Its not even remotely close, the largest funds are limited in what they can trade based on liquidity.

Evidence enough for me is that many large funds return capital once they reach a certain AUM.

Buffett has also been quoted to say something along the lines of he could return 50%+ annually if he was only managing a few million.

Re: Would a mutual fund manager to better with $1 billion or $100 mill
 

[ QUOTE ]
I was talking to someone at work about this today, and to me, it seemed to make sense that the same manager would have better results with the smaller fund, as it would allow him to be more agile as well as put more into what he considers his best options. Versus for a larger fund, it becomes more similar to an index and thus is handicapped by its size.

However, the person I work with disagreed and said that there's no evidence, and no reason to believe that.

I think my position makes sense, but can anyone else explain why either way?

thanks,

jeff

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Your coworker is clearly right and everyone on this thread is clearly wrong. A manager will do much better earning 2% on 1b than on 100m:)

Re: Would a mutual fund manager to better with $1 billion or $100 mill
 

[ QUOTE ]
[ QUOTE ]
I was talking to someone at work about this today, and to me, it seemed to make sense that the same manager would have better results with the smaller fund, as it would allow him to be more agile as well as put more into what he considers his best options. Versus for a larger fund, it becomes more similar to an index and thus is handicapped by its size.

However, the person I work with disagreed and said that there's no evidence, and no reason to believe that.

I think my position makes sense, but can anyone else explain why either way?

thanks,

jeff

[/ QUOTE ]

Your coworker is clearly right and everyone on this thread is clearly wrong. A manager will do much better earning 2% on 1b than on 100m:)

[/ QUOTE ]

winnar (though i had the same thought, i didn't post it so i don't get credit [img]/images/graemlins/frown.gif[/img])

Barron

Re: Would a mutual fund manager to better with $1 billion or $100 mill
 

although i'm obviously being levelled, it was fund performance and not profits by the mutual fund manager

Re: Would a mutual fund manager to better with $1 billion or $100 mill
 

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although i'm obviously being levelled, it was fund performance and not profits by the mutual fund manager

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LVLD! (duh it was fund performance...not the funny part though)

Barron

Re: Would a mutual fund manager to better with $1 billion or $100 mill
 

I dont know about those exact numbers, but I think it depends on the fund manager as well. After reading Peter Lynch's books (one up on wall street, beating the street) it seems he did alot better with say 13 million , then he did with 3 billion. I would say anything over 1 billion though, and your going to have some huge problems you wouldnt otherwise have with say 100 million.