This topic has actually been studied:performance of top performing funds can be based on a manager's skill, but after a certain point that skill reaches the end of the runway. The more skilled the manager, the larger the AUM they can still get returns for, but at some point it's just too much.
> For an average fund in the cross-section, we estimate a drop in alpha of 20 basis points if the fund doubles its size over one year. We also find a non-negligible impact of the size of the fund industry, although its magnitude is significantly smaller than the impact of individual fund scale. We reconcile our findings with existing empirical studies. Taken as a whole, our results lend considerable support to theoretical models that build on the premise of decreasing return to scale for active portfolio management.
> For an average fund in the cross-section, we estimate a drop in alpha of 20 basis points if the fund doubles its size over one year. We also find a non-negligible impact of the size of the fund industry, although its magnitude is significantly smaller than the impact of individual fund scale. We reconcile our findings with existing empirical studies. Taken as a whole, our results lend considerable support to theoretical models that build on the premise of decreasing return to scale for active portfolio management.
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2872385
General topic discussed in the Rational Reminder podcast:
* https://rationalreminder.ca/podcast/136 (~15m30)
* https://www.youtube.com/watch?v=LhluPwDaNAQ&t=18m30s
Something to consider for anyone piling into (e.g.) ARK:
* https://awealthofcommonsense.com/2020/12/a-short-history-of-...