by Beth Brearley from interactive investor, 7th October 2025:
Large chunks of investor money can make it tricky for fund managers to quickly invest it as opportunities arise, particularly in the small and mid-cap space where it can prove difficult to enter or exit positions.
As a fund grows in size, the investment universe becomes smaller, particularly for funds that specialise in smaller companies. This is due to the potential liquidity risk of not being able to sell easily when owning a large stake in a smaller company..
Alliance Witan
While investment trusts don’t have the same liquidity issues as their open-ended counterparts due to their fixed capital structure, bigger trusts specialising in mid and small-cap companies must still navigate the constraints their size puts on them, while large-cap mandates can face their own challenges.
Following the merger of Alliance Trust and Witan last year, the combined company now has total net assets of £5.2 billion.
“The managers achieve diversification by distributing the portfolio across 11 managers,” says James Carthew, head of investment company research at QuotedData,
“It helps that Alliance Witan tends to be biased towards larger companies. However, Witan previously had a portfolio of investment companies. When it came to transitioning these, the Alliance Witan manager felt it was best to take its time, not because it had a problem with their liquidity but because it felt they were undervalued.”
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