Smaller Funds Still Watch from Sidelines

Performance is up and so are flows. So life must be good for most fund companies, right? Not really.

According to Doug Hanson who heads the Schwab Marketplace, half of the flows so far this year on his platform are going to international funds while 25 percent are going to small cap funds. That doesn't leave much for the average lesser known fund.

Out of nearly 6,000 mutual fund portfolios, over 800 funds have assets between $50-100 million while over 1,400 have less than $50 million, according to mutual fund research firm Financial Research Corporation in Boston. Some of these small funds are products from fund giants that have not been aggressively marketed. But others are run by smaller firms with limited budgets, limited brands, and limited sales, marketing and distribution strategies.

With reduced margins as a result of bear markets, increased compliance costs and fund scandals, some smaller funds are finally considering strategies to get in the game or they may be eaten by their competition. This may be the perfect time.