PT  - JOURNAL ARTICLE
AU  - Michael O’Neill
AU  - Camille Schmidt
AU  - Geoffrey Warren
TI  - Capacity Analysis for Equity Funds
AID  - 10.3905/jpm.2018.44.5.036
DP  - 2018 Apr 30
TA  - The Journal of Portfolio Management
PG  - 36--49
VI  - 44
IP  - 5
4099  - https://pm-research.com/content/44/5/36.short
4100  - https://pm-research.com/content/44/5/36.full
AB  - This article discusses the definition and determinants of capacity and outlines a practical approach for analyzing the capacity of equity funds. It is argued that capacity analysis should focus on effective capacity, defined as the level of assets under management at which any additional investments would generate alpha below a minimum threshold at the margin, for the active component of a portfolio. The approach combines potential drivers into an integrated analysis and generates insight into the critical factors for the capacity of the strategy being analyzed. The approach is illustrated for a factor-based momentum strategy and an actual equity fund.TOPICS: Security analysis and valuation, analysis of individual factors/risk premia, equity portfolio management