While acknowledging that smaller mutual funds can yield more in the short term, a report by research firm Lipper finds that in the long run, there isnt much of a difference in returns between small and large mutual funds.
"We found that there is no consistent benefit to being in a small fund versus a large fund," report author and Lipper Senior Analyst Andrew Clark told Reuters.
Some have argued that larger funds are advantageous because of a higher number of resources and low fees, while others have contended that smaller funds are better because of the obviously lower positions that are taken.
The report goes against a mid-1990s study by University of Texas Professor Sheridan Titman, which stated that the larger a portfolio, the more returns drop.
Clark admitted that most financial advisers believe the information in Titmans report. "Many financial advisers steer clients away from big funds out of fear that liquidity concerns will drag down their returns, but we found that fund size, frankly, does not matter," Clark told Reuters.