CIO, Portfolio Manager
Director of Trading,
Managing Director of Investments,
As the level of assets under management rise, the ability to meaningfully participate in a broad investable universe shrinks, trading impact costs rise, and the potential for alpha erodes. In asset management, we find diseconomies of scale — as mutual funds and hedge funds get larger, their performance tends to suffer.
Joseph Chen, Harrison Hong, Ming Huang, Jeffrey D. Kubik; "Does Fund Size Erode Mutual Fund Performance?" The Role of Liquidity and Organization” (Dec. 2004) Andrea Gentilini, “How AUM Growth Inhibits Performance” (May 2014)