“We think there could be an advantage with a larger size. We advocate lower portfolio turnover and this seems to be a feature naturally due to the physical task of selling or buying a large position in a stock. High portfolio turnover is more likely to provide a drag on overall performance,” adds Mr Jones.
Some asset management firms argue there are no limitations on the size of their strategies due to the excess liquidity available in the sectors in which they invest. European investment house Carmignac rules out any capacity restraints on their £24.6bn Patrimoine fund and £7.1bn Investissement fund.
“If some markets are illiquid we avoid investing in them,” explains Sandra Crowl, a member of Carmignac’s investment committee. “These funds have a large cap focus ensuring that the equities positions are scalable.”
Other popular investment portfolio staples appearing in the top 20 include M&G’s £11.2bn Optimal Income fund, run by Richard Woolnough, and the £7.6bn M&G Recovery strategy, run by Tom Dobell. M&G has previously taken steps to slow funds into Mr Woolnough’s corporate bond offerings, which sit outside the top 20 largest funds, over potential liquidity concerns in the corporate bond sector and is currently ruling out the future soft-closure of both vehicles.
In a statement, the firm said: “In the world of retail funds, our funds do appear to be rather large. But in the institutional world, a fund of this size really wouldn’t look unusual at all. Not surprising perhaps when the aggregate value of the companies making up the FTSE All-Share is roughly £2trn. Size isn’t an issue for us.”
The list of the 20 largest funds highlights outperforming funds that continue to attract investor inflows. But with some funds nearing the £30bn mark and even the smallest of the top 20 soon to reach double figures, investment houses will have to remain vigilant to stop size becoming a detractor from performance.
Katie Holliday is a freelance journalist
