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ample, offices at Tiger Management alone were reported to have operating costs of $45 million a year.1 Tiger had about 180 employees in its New York headquarters and worldwide. Soros had 240 employees in New York and an additional 300 worldwide in early 2000.2

ASSETS REACHING A CEILING

The more assets a manager has under management, the harder it is to deliver excellent returns. Some funds have grown too large. It has been suggested that $10 billion is the ceiling. Global macro funds, those that are opportunistic and global in searching for stock, bond, currency, and futures market opportunities, have been analogized to conglomerates, since they add on different businesses to increase their capacity. The less diversified the strategies in a fund, the lower the capacity.

Some critics say that Tiger was still basically an equity stock picker. It was too big and too fundamental at its peak of $22 billion in 1998. Robertson's troubles began in October 1998. Soros's assets under management also peaked at about $22 billion in August 1998.

Some analytical studies show that many hedge funds generate their best performance in the early years when there are fewer assets under management and the fund is more nimble.3

Too many assets are problem for all managers—including mutual funds. In Common Sense on Mutual Funds, John Bogle advises investors to avoid large organizations that have no history of closing funds or that seem willing to let their funds grow to seemingly infinite size irrespective of their investment goals.4 "Excessive size can, and probably will, kill any possibility of investment excellence. The record is clear that, for the overwhelming majority of funds, the best years come when they are small."5

Bogle supported this with data on funds' returns compared with the S&P 500 Index. He looked at the experience of five of the largest actively managed equity funds whose aggregate assets grew from $500 million to $37 billion during the 1978–1998 period. Uniformly their performance deteriorated. He concludes the pattern is familiar: profound reversion to the mean. From the start of 1978 to the end of 1982, these five large funds amassed a substantial performance edge over the S&P 500 index, outpacing the benchmark by 10 percentage points a year. They achieved this edge when they were relatively small with av-