Ranked: Hedge funds that investors love—and hate

Hedge report card: Best and worst of 2014

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."