The bigger the better, right? Fund size, that is. The sentiment is understandable, but those adhering to it in investing might be disappointed. Conventional wisdom in the funds industry suggests that the larger the fund, the harder it is to achieve excess returns.

The issue of how fund size affects returns is particularly relevant given the recent spate of fund manager mergers. There have dramatic changes in funds under management of different managers as well as a number of new players now around.

The question has to be asked: Can fund managers put in returns that are significantly above the benchmark in the future, as their funds under man...