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From Kirsten Bischoff, Opalesque New York:

For all too many hedge fund managers, reading about asset flows (+$2.13bn in April according to HFN), has become an exercise in controlling frustration. “Right now, from the top down, there have been net inflows in 2010, but the big funds have absorbed the lion’s share of those net inflows; the smaller funds have been left out,” says Howard Eisen, Managing Director and Co-Founder of New York-based hedge fund advisory and capital introduction firm FletcherBennett Capital.

Although Eisen’s summary of the current asset-raising environment is gloomy, he doesn’t see this dynamic lasting much longer.

“The big guys are actually getting really big during this run up and at a certain point it begins to affect performance. You cannot be anywhere as nimble at $5bn as the manager that is $500m,” he says.

Eisen is not alone in citing the law of large numbers as a damper on performance. In a recent Vanity Fair profile, Steve Cohen says of his firm SAC, “We’re not going to generate those larger numbers now that we are bigger…When I was generating those big returns, you know, it was ‘what’s a hedge fund?’ We were so much smaller. Now we’re bigger. Math applies.”

As big funds are near capacity, Eisen recommends smaller managers look to a large subsector of investors that many tend to overlook: small pensions and endowments – those with assets under $......................

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