New Delhi, Sept. 12 -- Chirag Setalvad of HDFC Mutual Fund is in an interesting position as manager of India's largest mid cap fund. With Rs.85,000 crore of assets under management, HDFC Mid Cap Fund the only one in its category to rank among the country's 10 biggest mutual funds. It's currently in third place.

However, this badge of honour may come with its own set of challenges, some experts say. They believe that as a fund grows bigger, it becomes harder for the fund manager to generate alpha (returns above the benchmark). The rationale? As a fund grows, the manager needs to buy and sell in ever-larger quantities, which makes it difficult to enter and exit smaller companies and benefit from their rapid growth.

While other categories ...