LICs, page-303

Hi anf0. I'd prefer not to illuminate, given I still work there. But it is a firm with assets under advice of several hundred billion. So our reach is pretty deep.

I agree that it's a big call to hammer small firms/funds. But its more nuanced than that. The 'small FUM' effect, which is obviously just the reverse of the 'too much money kills active performance' effect, is real. However, if your business is not competitive and you end up having to shut the fund down, that's not a great outcome. I'm not saying that it's about to happen with Morphic. It's just that I don't feel the need to take that risk when there are others businesses out there on a firmer footing (and better track records). There is no real number as to what's an ok number. It's about trajectory and ability to effectively market. We supported Antipodes at a ridiculously low level of FUM. Why? Because we knew the money was going to pour in. Same with Firetrail (albeit to a lesser extent). But there are other funds out there with higher FUM that is either stagnant or falling. Couple that with mediocre returns, which can be a vicious circle in itself, and it can get ugly.

Yes, small can be good. However, it pays to remember that this does not automatically equate to outperformance. Some sectors are better for this than others (i.e. small/microcaps). And while I take your point about the costs of funds management falling with the rise of technology, this cuts both ways for active managers. Better technology has also meant that more firms can do more research which equals more sharks in the tank and tougher conditions in which to generate alpha.

Regarding funds and redemptions, I look at it like this. If you have identical strategies in a fund and a LIC and both are running $50m, I'd take the LIC every day. Because, a fund you can redeem at NTA where as a LIC you may not be able to, especially if liquidity is poor. For long term holders, funds are more efficient. However, LICs do admittedly throw up trading arbitrage opportunities. If you want to try and play that, fine. But its not always the whole game in my view.

Hope that helps. I have a lot of posts up on this sort of stuff if you can be bothered looking.