A Fund's Asset Size and Market Cap

A fund's asset size is simply the total amount of dollars invested in the fund at a certain point in time; it is the fund's net asset value multiplied by the number of shares outstanding. Most funds report their assets monthly.

How sizes compare

There's no direct relationship between a fund's size and the size of the companies in which it invests. A fund with a $10 billion asset base, for example, doesn't necessarily own large-cap companies with $10 billion market capitalizations. It can buy stocks of any size—theoretically, at least.

We say "theoretically" because very large funds may have difficulty buying very small stocks. It's tough to put large dollar amounts to work in a small market. Small-cap stocks take up less than 10% of the U.S. market's overall assets; large caps, meanwhile, account for about two thirds of the market. In other words, in terms of number, large-cap stocks are a small part of the market (as you know, there just aren't an unlimited number of GE-size firms). In terms of market cap, though, they dominate. It's therefore easier for a fund manager with a lot of assets to buy bigger companies than to own a small fry.

To illustrate ...

Let's take a hypothetical example. If Fund ABC, with $81 billion in assets, was really bullish on resort owner Northern Vacations and wanted to make it a large part of its portfolio, it couldn't. The value of all of Northern Vacation's shares combined is about $1.6 billion; if Fund ABC could buy all of it—and legally it cannot—Gaylord would still make up just over 1% of the portfolio. A fund with fewer assets would have a much easier time loading up on these shares.