When it comes to funds, bigger is not always better. Here’s why
The size of asset managers is an additional headwind to them outperforming their benchmarks
Few dispute the power of a strong brand. During a trip to the supermarket we place a bottle of branded tomato sauce into our trolley instead of the supermarket’s private-label brand, even though it is more expensive, even though the taste of the private label brand may be more similar to the branded product than we realise.
Similarly, when investing we may take comfort in choosing a fund that is managed by a large fund manager whose brand we recognise, even though their product may be similar or even poorer than a competing offering that is less well known.
Having a trusted brand has helped some of SA’s large asset managers to become very large indeed, with some exceeding R500bn in assets under management. The bulk of this money is invested domestically, where it has become harder to put an asset base of this size to work effectively...