York Capital Management, with $11 billion under management, earned the overall top spot in Absolute Return Magazine's second annual hedge Fund Report Card for 2010, the magazine said Tuesday.
The report, based on investor responses, had York edging out last year's winner Bridgewater Associates, a fund with more than $50 billion under management.
"York is not the biggest hedge fund, but I think that one of the things that happened in 2008, is that they did not gate investor capital (block investor access to capital) ", says Celarier. "And investors remember that."
Another newcomer to the overall top five was number one in the category of alignment with investors' interest. Adage Capital was said by investors to have a commitment to improving returns—and didn't use market conditions as an excuse for their performance.
Among the big players, John Paulson's Paulson & Company fund slipped in the overall rankings from number three last year, to number 17, with some investors are concerned the fund is becoming too big.
JP Morgan's Highbridge Capital hedge fund was the biggest decliners on the overall list, falling from fourth to thirty-second place. But big wasn't necessarily bad. Fortress Investment Group moved up to tenth from thirtieth last year.
Brad Alford of Alpha Capitalin Atlanta, Georgia, says his high net worth clients aren't shying away from big funds, as long as they have a good track record.
"They can't be at the top all the time," said Alford. "Even Buffett has underperformed the market for long stretches of time."
But Alford says, in the wake of the 2008 financial meltdown, clients now want to avoid hedge funds which make it onerous for them to get their money out. "They are so concerned about liquidity right now. They don't want to go through another situation like 2008."
When it comes to liquidity and transparency, Ken Griffin's Citadel Fund gets an F on the Hedge Fund report card, ranked dead last in both the overall and alignment with investors' interests categories.
One factor making transparency even more important now, says AR's Celarier, is institutional investors are becoming increasingly important for hedge funds.
"We don't see institutions backing off, they're going directly into hedge funds," Celarier said. "Institutions may need more disclosure and more security. They may be less demanding on performance, but they want to make sure the money is safe."