How Fund Characteristics Relate to Fund Capacity Constraints

Can the popularity of a fund inhibit its potential returns? Our research suggests that it can, but each fund’s unique capacity depends on a number of characteristics such as turnover ratio and liquidity. In this study, we explore how these factors can impact capacity and introduce a new way to measure a fund’s capacity constraints.

In this report, you will learn:
  • Funds’ historical capacity levels, as measured by alpha
  • Our analysis of key factors that drive a fund’s capacity constraints
  • The benefits and drawbacks of various fund family sizes in this area
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