Ranked: Hedge funds that investors love—and hate

Here's a lesson for hedge fund managers: Listening to your clients pays off.

Firms that ranked high on Alpha's Hedge Fund Report Card this year weren't always investor favorites. But Ken Griffin's Citadel and other shops have increased risk controls and various operational functions while posting strong returns, earning them an "A" from current and potential clients surveyed by the Institutional Investor hedge fund-focused publication.

The annual ranking looks at "alpha" produced by managers—skill-based returns above market benchmarks—in addition to factors like infrastructure, transparency and independent oversight. Institutional investors such as pensions and endowments evaluated the 100 largest hedge fund firms; 58 got enough of a response to receive a grade.

Egerton Capital, a $13.1 billion stock-focused shop in London, was the most loved, with high marks for risk management, transparency, infrastructure, liquidity and more.

Silver Point Capital, the $8.5 billion credit focused firm in Greenwich, Connecticut, was second with positive feedback on its returns, investor relations and independent oversight. Silver Point topped the same survey last year.

"The results show that how hedge fund firms treat their investors does matter," Alpha Editor Michael Peltz said in a statement. "Strong performance alone is no longer enough to guarantee a good relationship with investors if they feel they are being treated poorly. Being more open and accessible to investors may even help managers when their funds are going through a rough patch."

Alpha Hedge Fund Report Card 2015 Winners & Losers

Egerton Capital London, U.K. 86.60 1
Silver Point Capital Greenwich, CT 86.19 2
Citadel Chicago, IL 85.13 3
Magnetar Capital Evanston, IL 84.39 4
Perry Capital New York, NY 84.06 5
Greenlight Capital New York, NY 66.08 54
Cevian Capital London, U.K. 65.69 55
Mason Capital Mgmt New York, NY 61.19 56
Convexity Capital Mgmt Boston, MA 60.29 57
BlueCrest Capital Mgmt London, U.K. 55.76 58
Source: Institutional Investor's Alpha, Feb. 2015

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Some well-known hedge fund firms didn't live up to investor standards.

David Einhorn's New York-based Greenlight Capital earned a "D" with the fifth-lowest score, thanks to low marks on infrastructure, independent oversight and transparency. Michael Platt's U.K.-based BlueCrest Capital finished at the bottom of the ranking with an "F." The firm got poor feedback on alpha generation, alignment of interests, investor relations and others.

Poor grades don't mean firms are doomed. One of the least-liked firms in early 2014 was Bill Ackman's Pershing Square Capital Management; its funds were some of the top performers in the industry last year.

Spokesmen for Greenlight and Perry did not respond to a request for comment from CNBC.com; a spokesman for Silver Point declined comment. Representatives for Egerton, Cevian, Mason, Convexity and BlueCrest declined to comment to Alpha on the report.

Griffin told Alpha that Citadel is far better prepared for a market downturn like 2008, when its main fund lost more than 50 percent.

"P&L attributes are like radar in a plane in a fog-filled night," Griffin said of understanding the source of profits and losses for better risk management. "In a downdraft [portfolio managers] know where they are and can get where they need to be."

Magnetar co-founder and president Ross Laser underscored the benefits of a client-friendly approach.

"To be a robust firm, you need to build out a well-structured investment platform and infrastructure and engage with investors," he said by email to Alpha.

Read the full Alpha report here.

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CORRECTION: This version corrected that BlueCrest Capital is based in the U.K.