Name: M K Lodi & Pachipala Girish Kumar
Country: India

Year: 2026
Volume: Volume No: 13, Issue No: 1, Year: 2026
Page Number: 269-278
DOI: https://doi.org/10.5281/zenodo.19659988

ABSTRACT
India’s mutual fund industry has witnessed rapid growth, reaching approximately INR 66.4 trillion in assets under management (AUM) by March 2025, according to AMFI data. This
growth raises an important question: does increasing fund size improve performance, or does it eventually hinder it? This study examines this issue using data from 150 actively managed equity mutual funds across five SEBI categories (large-cap, mid-cap, small-cap, multi-cap, and ELSS) over the period April 2015 to March 2024. Using data from AMFI and Bloomberg, the study analyzes fund performance through panel regression, threshold regression, and Data Envelopment Analysis (DEA), with the RBI 91-day Treasury Bill as the risk-free rate. The findings indicate an inverted relationship between fund size and performance. Mid-sized funds tend to deliver better risk- adjusted returns, while very large funds (above INR 20,000 crore) show reduced efficiency due to liquidity constraints and portfolio management challenges. Although larger funds benefit from lower expense ratios, these cost advantages do not fully compensate for the decline in returns. Overall, the study suggests that excessive fund size may lead to diminishing performance, offering important insights for investors, fund managers, and regulators.

Keywords: Mutual Fund Size, Assets Under Management (AUM), Risk-Adjusted Returns,
Operational Efficiency, Diseconomies of Scale, Equity Mutual Funds, Indian Mutual Fund
Industry