Morningstar has found that asset bloat of funds has become an increasing issue as investors plow money into small-cap funds and as they focus on a shorter list of funds as targets. Asset bloat is a problem and can lead to underperformance as managers struggle to find good investment ideas and as they face hurdles in unloading stock and buying names at good prices. Small-cap funds that suffer asset bloat often creep up in market capitalization as managers buy larger stocks that can support larger investments.

Russel Kinnel, Morningstar analyst, said from 2000 to now, the growth of funds with $1 billion or more grew from 730 to 1,123. Among small cap funds, it's even more dramatic, growing from 36 to 81. He said investors should assess their funds by the median point at which different funds close to new investors. He said for small caps that number is $800 million and for mid caps, it's $3 billion. Large caps often close at $18 billion, he said.