It's no secret that there's been a flight to quality among hedge fund investors (hedge fund news). The biggest investors have shown a fondness for big-name, proven fund managers, even if those fund managers haven't exactly proven themselves as customer friendly.

The share of industry assets held by firms with more than $1 billion under management has risen gradually from about 75 percent in 2006 to about 82 percent at the start of this year, according to Hedge Fund Intelligence and noted by Breakingviews.

It also notes that "older managers tend to lag younger managers. Larger managers tend to deliver lower absolute returns than smaller and younger ones. Smaller funds in fact beat larger ones every year between 1996 and 2009, except for 2008. New managers are also more open to giving investors a better deal than is traditional, whether in terms of fund governance or fee structures."

"Larger funds, meanwhile, may struggle to find opportunities big enough to make a difference. Or they may have to take more risk to generate the same returns," reports Breakingviews. "There's also the danger that management fees bring in so much money that big funds may focus on accumulating assets rather than investing well."

You would think that more institutions would be waking up to this. Many are hamstrung by rules that require a long track record by the hedge fund before they can invest. That may change.

For more:
-here's the article

Related Articles:
The reform effort: Hedge funds and private equity funds
Has Goldman Sachs found a loophole to Volcker Rule?
Hedge fund manager corners market for cocoa
John Paulson to remain king of hedge funds?