Are popular small-cap funds a poor investment choice?

How does an increase in a small-cap fund's size impact its performance, and is there a limit to how large it can grow before returns suffer? - Anonymous When small-cap funds grow larger - often due to strong performance attracting more investor money - they encounter unique challenges. However, this doesn't make them a poor investment choice. It simply means investors should understand the hurdles these funds face as their size increases. What are the typical challenges faced by a larger small-cap fund? 1. Limited investment opportunities and liquidity constraints: Small-cap funds often invest in companies valued at around Rs 1,000-2,000 crore. For a fund managing Rs 100-200 crore, taking meaningful positions in such companies is relatively straightforward. But as the fund size grows, achiev

This article was originally published on January 08, 2025.