TheStreet.com – When it comes to hedge fund returns, size matters.<\/p>\n
So far this year, hedge funds have returned an average of 2.42%, according to data compiled by Standard & Poor’s. That’s below the S&P 500’s return of 3.76% and, barring a huge December, sets the industry up for its second straight year of disappointing returns.<\/p>\n
Numerous explanations are given for the problem, including sluggish markets and too many managers chasing too few strategies. But one overlooked factor is that funds are getting larger.<\/p>\n
The 50 largest hedge funds together control $385 billion of assets, according to a list published by Alpha magazine. That’s more than a third of the total asset base for an industry estimated at $1 trillion. When one considers that there are about 8,000 to 9,000 managers, the power concentrated at the biggest shops can’t be underemphasized.<\/p>\n