Lipper Analytics thinks it has the answer to the age-old debate over whether size matters. No, not that debate. The fund tracker reports that the size of mutual funds does not effect their returns.

That conclusion runs counter the industry saw that an increase in assets puts a drag on a fund's performance. Indeed, many funds are closed specifically because their portfolio managers are seeking to protect their performance in the face of inflows.

The study was authored by Andrew Clark, a Lipper senior research analyst. He contends that larger funds are able to overcome any drag by relying on economies of scale. Those economies provide the managers access to more research and allows the funds to carry lower expense ratios.

The study covered roughly 450 actively managed U.S. diversified equity funds between 1990 and 2001. It found that some small funds offered higher gross returns over some time periods, but that those period of outperformance were not sustained.

Meanwhile, larger funds outperformed smaller ones on a net basis. That outperformance may be a result of the market cap of the stocks in which the funds invested, according to the research.  

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