Large funds are good, but don't become too large

Currently there are many types of financial institutions that help individuals and organizations to manage their wealth, and some of these institutions may claim to offer fixed incomes. These offered returns are normally higher than the returns given by the definitely safe securities such as government bonds, and become very attractive to certain types of investors who normally hold enormous funds and have scheduled payments each time period.

The word "fixed" may be confusing to some people, as a fixed income fund does not mean it offers a fixed return, instead it pays a return on a fixed schedule and the return could vary. Therefore, although people generally believe investing in a fixed income fund is less risky than investing in an equity fund, it still has some risk and it does not necessarily meet the return that you expect. Imagine you are a pension fund manager who manages an account of trillions of dollars and invest in fixed income funds. Once the fixed income funds cannot meet the requirement, which you should expect and do something about, you would choose several other funds which could be more risky but offer higher returns. By doing such thing, you turn yourself into a fixed income fund as you are doing what a fixed income fund would exactly do to meet their scheduled payments. However, you are still less likely to do better than the fixed income fund you invest in, when we assume you and the fixed income fund manager have close abilities. This is because you have high management costs and have to pay very high commission fees.

In the real world, many national pension funds and large multinational insurance companies employ fixed income fund managers and other types of fund managers including hedge fund managers to offer them fixed incomes, then they offer their clients with some products with fixed payments. Theoretically they are fixed income funds themselves, but their operation costs are much higher.

Therefore, I often believe large funds are more productive than smaller ones, as they can have more investment opportunities; however, once becoming too large, it is inevitable to start to invest in other funds, which I think is a very inefficient investment option.