What to do with your big, fat fund

Indian mutual fund investors have a strange love-hate relationship with large-sized funds. While choosing equity schemes, many of them ardently look for safety in numbers. They screen for schemes with the largest assets under management (AUM) in a category, even before they take a look at their performance metrics. But surprisingly, the same investors also fret about size the moment their fund crosses Rs 10,000 crore in AUM. When a scheme scales up to the mega-fund category, every short-term blip in its returns is analysed, debated and discussed threadbare, with investors constantly asking if they should exit because the fund is now too big to succeed! Such fears have worsened in the past year, as active managers in general have had great difficulty beating the indices. Cornering assets Thanks to this investor tendency to make a beeline for big funds, the large schemes in the Indian market have got steadily larger in the last few years. You may be surprised to know that the top three funds in the large-cap equity category today hog nearly 40 per cent of the total category assets. In the multi-cap category, which features 50 odd schemes, the top three corner 33 per cent of total AUM. The mid-cap space, with two dozen schemes, is even more concentrated, with the top three schemes managing 48 per cent of the money. Thanks to the mammoth assets under their bel