Navigating the Middle Ground: Foreseeing the Trajectory of Mid-Sized Funds

Abstract

This research paper studies different types of fund managers, focusing on mid-size managers to determine their position and strategy in the future. Mid-size funds are unique because they are larger than small, specialized funds but not as large as the larger fund managers. Most research in finance, currently focuses on either very large or very small fund managers, leaving a gap in the knowledge about the fund managers in between, what in this report, is called mid-sized fund managers. Since mid-size fund managers constitute a large part of the market, together with the lack of knowledge about them, it is important to learn more about how they operate and perform. Our study therefore aims to fill this gap by looking at how these funds work, how they perform compared to bigger and smaller funds, and how they should strategize in the future. A mix of methods was used for our research. To gain an understanding of the existing research, a literature review was made. Also, a quantitative data analysis was made, through gathering and analyzing data over funds Morningstar rating, fees, risk, and return, categorized by small-size, mid-size, and large-size fund managers. This combination of methods helped to get a full picture of the situation for mid-sized funds, both what previous literature suggested and what the gathered data showed. The quantitative data analysis shows that mid-size fund managers often have funds with higher fees than others, and their performance can vary a lot. Both the literature review and the data analysis that was made show similar results. The size of a fund manager seems to matter, and to be in the mid-size area is not optimal and they will unique challenges because of their size. Their main strategy should be to grow, and increase their market share, through consolidation and M&A. Our findings give a clearer picture of mid-sized funds, which is extra useful for people who manage them or consider investing in them. Understanding the special position of mid-sized funds can help in making better decisions, especially in times when the market keeps changing.