"Scale is the enemy of performance", which comes from Barton Biggs. In fact, what he is talking about is that the rising performance of a fund will bring in a lot of new funds, and the expansion of this scale will lead to the decline of performance, resulting in a strange circle, which will eventually lead to a short-lived fund.

stock selection of large-scale funds is restricted

First of all, large-scale funds may encounter some problems in investment, especially for companies with small market capitalization. There is a hard and fast rule on the investment of funds. All the funds of a fund company cannot own more than 1% of the assets of a stock. In this way, for a large-scale fund, if you invest in a small-cap stock, no matter how you invest it, it is impossible for this small-cap stock to have a large weight in the whole fund. The large-cap stocks occupy a large total market value, but there are few types, so invisibly, large funds will inevitably concentrate on investing in stocks of some large companies. Relatively speaking, it is easy to produce the phenomenon of centralized shareholding.

because a stock cannot exceed 1% of the total fund. The difficulty of stock selection will increase.

Large-scale funds are less flexible in operation

There is a so-called turnover rate problem in the operation of large-scale funds. Because of the influence of scale, large-scale funds will inevitably reduce turnover rate. It is difficult to be "radical" and active in performance. The characteristic of the China market is that growth funds occupy the main position, and growth is a very active part. However, large funds will be relatively stable, which is especially unfavorable to small-cap growth funds.

In addition, if large-scale funds want to be active, it will definitely bring about market oscillation. This is also an obvious thing. For fund companies, there are only two things that can be done. One is to control the scale, such as the subscription of new investor closed fund. To maintain the original characteristics of the fund, the scale can only be reduced. The second is to change the investment strategy of the fund and transform a "radical" fund into a stable fund.

For us investors, the expansion of a stable fund may not be a particularly critical issue, but for small-cap growth funds, it is probably a big problem.

however, a huge fund may have an advantage, that is, the whole market will become more stable and the short-term fluctuations will be reduced. Let's wait and see.