Buy list concentration, the appeal of 'star' fund managers and liquidity issues can result in a large number of fund buyers sticking to a select few vehicles, which in turn leads to high levels of assets under management (AUM) in a small number of funds.
In addition, she said the team regularly seeds new funds.
"This is often where a highly experienced manager has decided to set up shop elsewhere, often because they had tired of the shackles of running large funds that had been marketed to the hilt to grow the asset base, and then hindered them from doing the job they love."
Alyx Wood, co-manager of the Downing Diversified Global Managers fund, also tends to favour smaller funds, and likened the size debate to "a race between a superyacht and a tanker".
"Smaller funds are aligned with the fund managers, as they tend to invest more of their money and own some of the management company. This means they will not be pressured into making changes due to what the business wants," he said.
"Their time horizon is also matched to their trade ideas and style. Big houses cannot do this, and even if they have a good idea, the trade profit is limited.
"This is because their ‘elephant footprint' trade will move prices on the way in and out adversely, equalling lower returns."
Additionally, Ben Yearsley, managing director of Shore Financial Planning, agreed smaller funds often perform well, and does not understand "why there is such antipathy towards new funds".
He highlighted many funds with smaller AUMs could outperform because it is easier to move in and out of positions and take advantage of shorter-term opportunities, which is something larger funds often struggle with.
"Of course, the flip side of this is that early performance may not be repeatable as the fund gets larger," he warned.
"Smaller funds also sometimes have an advantage over their larger peers in that the portfolio has been built from scratch by the manager.
"This means there are no historic positions in it that had previously performed poorly, that the former manager had fallen in love with and did not sell."
Keeping active
However, Tilney Group's Jason Hollands said performance is ultimately driven by a fund manager's ability to generate alpha and remain genuinely active, as opposed to AUM.
"There can be advantages to smaller funds, particularly where the strategy allows the manager to invest in smaller companies, as they will have greater flexibility in accessing such companies than they would if they were managing a large fund.
"If you manage a £1bn-plus fund, it is hard to do this because of the restrictions on liquidity," he reasoned.
"However, there are disadvantages too: subscale funds typically have higher costs and managers looking after small pools of assets are unlikely to get the same level of access to company management teams as those with a lot more investor firepower."
