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What is an Asset Size?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 06 November 2016
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An asset size is the total market value of the various investments that are found in the portfolio of a mutual fund. The term is sometimes used interchangeably with total assets or total net assets when describing the size of the fund and its holdings. Assessing the asset size goes beyond simply looking at the cumulative worth of the mutual fund’s investments, in that the information can be helpful in determining how well the current set of holdings is working toward allowing the fund to achieve its stated goals.

Investors generally understand that having a huge investment portfolio does not necessarily mean that the portfolio is more efficient or better than a different portfolio. The idea is to ensure that each of the assets involved are in line with the investment style of the fund. If the nature of a given investment, or the entity that issues the investment, should change in a manner that is not in keeping with the fund’s financial style, then it should be replaced. The replacement may be accomplished by trading for another investment that does meet the investment style, or acquiring more interest in an investment that is already found within the portfolio.

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This means that determining the asset size can be very helpful when it comes to the management of the mutual fund portfolio. The administrator of the fund not only wants to make sure the realized return of each investment meets or exceeds the projected return, but also that the level of risk and future prospects of the investment are likely to aid the fund in moving closer toward its goals.

If there are signs that one or more assets held by the mutual fund fit the style and of the fund’s administrators, changes are usually made in a relatively short period of time. If those changes do not take place, those assets could produce a negative effect on the net asset value of the shares issued by the mutual fund. Since net asset value has to do with value per share of the shares issued by the mutual fund, maintaining the most efficient balance of assets is essential to keeping the fund attractive to investors, and generating a decent amount of NAV returns.

Asset size is essential when it comes to identifying the right size of any mutual fund. For funds that function in larger market segments, such as money market or index funds, a bigger base of assets is usually an excellent approach, since it can help protect the fund from situations where block trading takes place. However, a smaller mutual fund may find that taking on too many different assets may make the fund hard to manage efficiently, leading to less return on the investments. When the asset size and the investment style of a mutual fund are found to be incompatible, the phenomenon of asset bloat, or too many assets to handle, may in fact drive away investors that would otherwise have been interested in participating in the fund.

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