...Capacity Management Supports Performance: In Fitch Ratings' opinion, effective management of a fund's capacity can provide an investment edge, as it supports consistency in performance. By striking a balance between a fund's assets under management (AUM) and its ability to outperform, capacity management can align the long-term interests of asset managers and investors. Multiple Capacity Drivers: A fund's size is only one factor driving capacity constraints. Asset class, investment strategy, investor base, liquidity, diversification also influence the point at which size has a detrimental effect on performance. Fund providers take all these factors into consideration when calculating capacity limits. Large Funds Maintain Performance: Fitch has found that, as AUM grows, large funds in capacity-constrained categories have maintained or improved their performance relative to peers and their benchmarks. These results, while not definitive, supports the idea that the largest funds have not yet...
