Hedge fund managers need between $250 and $375 million in assets to "break even" and survive off management fees alone, while the largest hedge fund firms incur significant additional costs due to complexity and size, new data shows.

The report, 2012 Hedge Fund Business Expense Survey, was conducted by Citi Prime Finance, part of Citigroup, and covered over 80 hedge funds across North America, Europe and Asia. The hedge funds represented $186 billion in assets under management and 8.5 per cent of total industry assets.

According to the survey, this year manager expenditures on support personnel and third-party expenses totaled $14.1 billion. Such expenses include marketing, investor relations, risk and compliance, operations and technology, and business management. They do not, however, include compensation costs for investment management personnel.

Sandy Kaul, US head of business advisory services at Citi Prime Finance, said smaller managers with assets under $250 million are "hard pressed" to survive on management fees alone without capital injections from partners or incentive fees. This segment represents some 80 per cent of all hedge funds and a quarter of total industry assets, he noted.

Meanwhile, the "very largest managers" - accounting for about 1 per cent of the hedge fund universe - control approximately 60 per cent of total industry assets but face "steep costs" due to diversified and complex portfolios.