How Big Is Too Big for an Equity Strategy?

Understanding when asset growth begins to erode a fund’s edge is critical for investors. Morningstar Manager Research uses a structured framework to evaluate capacity, liquidity, and trading behavior, assessing whether strategies can continue to meet their objectives as assets scale.

Seven years from our original analysis, we revisit the Virtus KAR Small-Cap Growth strategy to test whether early warning signals proved meaningful. The findings show how capacity pressures can gradually alter implementation, reduce flexibility, and ultimately affect performance. 

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