Hedge funds are growing their assets again (hedge fund news), positioning themselves to collectively top the $2 trillion mark again. Which prompts a good question: Are some funds now too big to fail?

Bloomberg raises the issue with its look at Paulson & Co. Recall that John Paulson (John Paulson news) has set the industry on fire the last three years. He made a whopping $3 billion in 2007. Paulson & Co. now manages $32 billion in its hedge funds, which ranks it third behind JPMorgan Chase (NYSE: JPM) and Bridgewater Associates. Paulson, however, is still open to new investors and is known for some concentrated bets. So you have to wonder if the firm represents a possible Long-Term Capital Management. Would there be any systemic impacts if several of its funds were to tank?

Another issue is whether the firm can sustain its performance as it adds more assets so quickly. Already, according to Bloomberg, some of the firm's returns are slowing down this year. Yet the firm shows no signs of slowing its fund-raising efforts, which is surprising in some regards. Other large hedge funds have shown a willingness to close and even return money to investors. 

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