Bigger is better if you're a fund manager (though not if you're their client): There is much to be said for looking at incentives when considering a particular type of behaviour and fund management is no different. The fee structure that the majority of funds have is based on assets under management (AUM) rather than performance, meaning fund managers have an incentive to make their funds as big as possible. This in turn makes a 100 stock portfolio much more attractive than a 25 stock one. Say, for example, a particular fund's remit was to invest in companies with a market cap larger than €300mn. Given the practical limitations of owning a large part of a company (the more you own the more your buying and selling affects the price - frictional costs), you may not want to own more than say, 4% of the outstanding stock. With a 25 stock portfolio this would limit the size of your fund to €300mn. However, throw a few clever looking equations into the mix and tell people EMH says their portfolio is now optimised and voila, all of a sudden you have yourself a 100 stock, €1.2bn fund that produces four times the income of the smaller portfolio. As Jack Bogle, the former CEO of Vanguard put it, "Amassing assets under management become the [asset management] industry's primary goal, and our focus shifted from stewardship to salesmanship".

David Fuller's view I find this report too important to read just once. I would file it separately, for further reference. We will also post it in the Forum.