Huge fund inflows don't always lead to poor performance, but the number of coincidences, and the wider problems of fund capacity, are too plentiful for Josh Ausden...
It is one of the great paradoxes in fund management that success often leads to disappointment. Top-performing managers understandably get a lot of attention from investors and advisers, and inflows duly follow – especially if the fund in question has a strong marketing effort behind it. Unfortunately, every fund has (or at least, should have) a capacity limit. The bigger the sum of money under management, the harder it is for managers to get access to less liquid areas of the market. If, for example, a manager excels at picking sub-£100m companies but runs in excess of £3bn, they wou...
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