For example, suppose a small-company fund manager wanted to buy Amalgamated Hatrack, which makes coat hooks from faux moose antlers. So a small fund could make a big bet on Amalgamated Hatrack. That's not enough to make much of a difference in the fund's performance. If there were a national mania for faux moose antlers, the bigger fund's shareholders would miss out. You can't just buy funds because they're small.
Some small funds deserve to be small.
Styles that reward flexibility. If you just want a portfolio of large, blue-chip stocks, a small fund doesn't really offer many advantages. But if you want a fund that rides price or earnings momentum, a small fund can help. Two managers with an office and a desk can run a fund, but it helps to have high-powered research and trading desks at your disposal, too. Similarly, large fund companies sometimes roll out funds that, for one reason or another, temporarily languish.