What Is Asset Size?
Asset size is the total market value of the securities in a fund. It can also be referred to as assets under management. Funds regularly report total assets which can be affected by supply, demand and market return.
Asset Size Explained
Asset size for mutual funds is often reported by share class. When it comes to the size of a mutual fund for investment, bigger is not necessarily better. Key aspects for investment fund quality and investment consideration are typically the fund’s investment style and its ability to meet or exceed the returns of market benchmarks through its investment allocations.
However, the asset size of a fund can be important for investors to consider for a few reasons. While asset size does not greatly influence a fund’s performance, top investment managers and top-performing funds are likely to see greater fund inflows. Investors in funds with a larger asset size can also benefit from greater economies of scale which translate to lower fund expense ratios since the expense ratio is calculated as a percent of total assets. Larger funds also tend to be more actively traded in the market with higher average daily trading volume providing for greater market liquidity.
Asset Size Volatility
Asset size can be affected by supply, demand, and market return. Increasing market return is a positive factor that increases the value of the portfolio from market gains. Capital appreciation is a top priority for investment managers and a metric that is easily followed by investors. However, when assets rapidly increase from inflows so-called "asset bloat" may occur which can present challenges for the portfolio managers. Capital inflows and outflows can substantially affect operational and transaction costs. Many funds have redemption fees for short-term redemptions which help support trading activities when investors redeem.
Substantial inflows to a fund are what cause asset bloat. This is predominantly an issue with active funds. Active investment managers must deploy funds into current allocations or they may choose to invest in new securities. Some funds may also limit the asset size capacity of their funds. Investment managers can choose to close funds to new investors for various reasons with asset capacity often a factor in fund closings.
Largest U.S. Funds by Asset Size
MarketWatch provides details on the investment market’s largest funds by asset size. Funds are reported by share class assets. As of Jan. 26, 2021, Vanguard had five of the largest funds in the investment market.
- Vanguard 500 Index Fund Admiral Shares (VFIAX)
- SPDR S&P 500 ETF Trust (SPY)
- Fidelity 500 Index Fund (FXAIX)
- Vanguard TSM Index Fund Admiral Shares (VTSAX)
- iShares Core S&P 500 (IVV)
- Vanguard TSM Index Institutional Plus Shares (VSMPX)
- Fidelity Government Cash Reserves (FDRXX)
- Vanguard Federal Money Market Fund (VMFXX)
- Vanguard Total Stock Market Index Fund (VTI)
- Fidelity Government Money Market Fund (SPAXX)