The top ten hedge fund firms control $157 billion between them, while 40 per cent of the assets that make up the global hedge fund sector ar...

The top ten hedge fund firms control $157 billion between them, while 40 per cent of the assets that make up the global hedge fund sector are controlled by the top 50 firms, according to a report by Morgan Stanley, the investment bank. Today big hedge fund firms such as Farallon with $16.5 billion under management and Och-Ziff with $15 billion, burgeon as investors increasingly flock to firms with proven resources and knowledge, they feel can be trusted, said the report. The concentration in assets coincides with the highest returns coming from illiquid strategies, derived from emerging markets, private equity or credit markets, according to Morgan Stanley. The maturing market is squeezing funds of hedge fund businesses, which have seen their inflows of cash drop from 40 per cent in 2002-2004, down to just 6 per cent last year. High net worth individuals and other large investors are no longer as reliant on the intermediary services of many funds of hedge funds firms, according to the report. Initially growth among these firms was driven by pension funds and private clients looking to diversify their portfolios. But lately big investors have required liquid investments where funds can be withdrawn at short notice. The swing towards big, established players will make it harder for new entrants to the market, while more consolidation is predicted as hedge funds firms go up for sale and cash is returned to investors, said Morgan Stanley.