We noted recently that a tremendous opportunity seems to be opening up for smaller hedge funds. At some big pension, the need for souped-up performance now apparently outweighs the lower level of comfort they've long had with smaller, unproven funds.

The California Public Employees' Retirement System (CalPERS) and the New Jersey Division of Investment might be at the head of a movement toward smaller funds. Goldman Sachs (NYSE: GS) offers more confirmation of this trend. MarketWatch quoted Lawrence Restieri, co-head of Goldman Sachs' Alternative Capital Markets Group at a conference. The focus on funds with at least $2 billion under management has led to a situation that would intuitively "lead you to believe there's opportunity in smaller emerging managers." 

Goldman now appears to be focusing on new, emerging hedge funds and managers who have less than $1 billion in assets.

"That's resonated with a lot of our clients," Restieri said. "Larger clients--with $100 million plus--they don't need help finding Och-Ziff. They need help sorting through the thousands of smaller managers out there. So there's value that our platforms can provide there."

In addition to performance, smaller hedge funds can also distinguish themselves with solid compliance programs and strong third-party administrative supports. 

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