JPM, AQR win as hedge funds suck in assets

Mary Callahan Erdoes
David Grogan | CNBC

The fat funds are getting fatter—the largest hedge funds now control more cash than ever before.

Americas-based firms that each invest at least $1 billion managed a record high of $1.71 trillion as of Jan. 1, according to a report by hedge fund data and news service Absolute Return.

Assets of the 293 firms on the "Billion Dollar Club" list increased $250 billion over last year, up from $1.46 trillion at the start of 2013. The addition represents a 17.16 percent increase, the fastest growth since before the financial crisis in 2007. The previous record high was $1.68 billion on July 1, 2008.

The Absolute Return Composite Index, which tracks American hedge funds across strategies, gained 8.5 percent in 2013. While that was far below stock market returns, hedge fund proponents look to funds as much for diversification and risk protection as for just producing out-sized gains.

Firms that investors believe fill that role continue to consolidate their power.

The largest firm with assets under management remains Ray Dalio's Bridgewater Associates, which controls $87.1 billion in hedge fund assets. The 1,400 person firm manages $150 billion overall. Bridgewater, which bets on macroeconomic trends and is a favorite of large institutions like pensions and endowments, had its assets rise 4.56 percent over the year. Its Pure Alpha II hedge fund gained 5.2 percent in 2013.

''The Fed may be tapering but investors aren't. It's clear the industry knows what it's doing," said Amal Robleh, research editor of Absolute Return. "Many hedge funds continue to provide performance that's attractive to institutional investors which has resulted in an increase in capital allocations. The big continue to get bigger, but also more sophisticated, more institutional and more focused on stable growth rather than short-term gains.''