In light of recent research, Thames River Capital, the UK-based funds multi-manager, has advocated that smaller funds are generally more consistent performers than their larger counterparts.

The research targeted the 33 IMA (Investment Management Association) sectors and revealed that two-thirds of funds which were below average in size were more likely to outperform on a consistent three-year basis compared to the other funds in the same sector.

The findings reinforce the presumed wisdom of those fund managers who cap the size of their portfolios when operating in relatively illiquid markets.  

“Overall the fact that smaller funds have done better is no surprise. Smaller funds can be more nimble, and such an attribute has perhaps been especially useful over the last three volatile years,” Rob Burdett, co-head of Thames River, said in a statement.

Thames River analysed performance of the 33 funds over one-year periods in each of the previous three years to 30 September, in addition to drawing on the latest fund sizes from Lipper.  

While the firm acknowledges that the validity of this outlook will vary according to sectors, it highlights that it is particularly apparent in UK equity income, which is, coincidentally, a sector with some of the biggest funds.

In the equity income sector, for example, eight out of nine outperforming funds had a below-median fund size, with Artemis Income the only large fund in the group, with £4 billion ($6.2 billion) of assets.

Smaller funds generally outnumbered larger funds among the consistent performers in the active managed (14 out of 18), Asia Pacific (4 out of 6), global bonds (5 out of 7) and all UK companies (29 out of 43) sectors.

However, the global emerging markets sector deviated from this trend, with four out of the five consistent performers being of above-average size.