Researcher Morningstar says the overwhelming majority of Australian managed funds are very small, with about half of all Australian funds having assets of less than $5 million.

Morningstar's list shows hundreds of funds with $10,000, $15,000 or $50,000 in them.

The funds are mostly closed to new investors but do the one, two or three people remaining in the funds realise they are the last ones standing?

The reasons for the problem are mainly because the funds management industry likes to launch new funds while not doing enough to merge them with old funds or kill them off altogether. Whenever a big financial services institution buys another, the list of small funds grows.

ANZ buying the half of ING Australia it did not already own is just the latest example. ING and ANZ will say it will be business as usual but, over time, the ING funds that do not fit into the business plans of the ANZ bosses could end up on the back burner. Investors can expect more of the same if AMP is successful in its pursuit of Axa Australia and New Zealand.

All the big fund managers that are part of a bank or insurer have similarly large numbers of very small funds.

Many of the small funds appearing on the Morningstar list are offered on several investment platforms used by financial planning groups and each version has an individual identification code. Often, these small funds feed into a larger, viable pool. But even if a generous allowance is made for this "interfunding", the extent of the problem is still immense.

If we assume that closed and small funds attract the same investment management resources as fund managers' large funds, which I don't, there's still the issue of costs.

Small funds have hundreds of thousands of investors and though some may feed into a larger pool, each will have its own costs.

Those costs are mostly fixed, so as a fund decreases in size the costs spread among fewer investors.

The funds management industry says the law stops them from rationalising funds as much as they would like. That is only partly true: the funds management lobby group, the Investment and Financial Services Association (IFSA), estimates up to 25 per cent of all funds under management are in legacy products.

IFSA has been working with the Government since at least 2005 to change or relax the laws and regulations to make it easier for fund managers to rationalise their offerings.

In August, the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, flagged plans to release an options paper on product rationalisation and said he wanted the issue to be dealt with quickly.

He said it was bad for the investor "who is not getting the best return possible on their investment or access to features of newer products".

Financial institutions could be doing more but are reluctant to spend the money it would take to modernise the old technology platforms on which many of these legacy products sit.

While industry and the Government works to resolve the issue, investors need to ensure their funds have not been mothballed or neglected.

A possible tell-tale sign is if a fund is closed to new investors without much money left in the fund. Also, poor performance may indicate the fund is not being given as much attention as it should.

Check before switching funds. Make sure you are aware of any tax that will have to be paid upon leaving an old fund and watch out for any exit fees.

For a list of funds, their performances, their size and whether they are open or closed, the best place to check is with Morningstar on morningstar.com.au.