UPDATE 1-Biggest funds add bulk of new hedge fund cash-report

Thu Sep 30, 2010 4:37pm EDT

* Bridgewater Associates is biggest U.S. hedge fund, again

* Biggest funds take in bulk of new money from investors (Adds background, link to factbox)

BOSTON, Sept 30 (Reuters) - Bigger actually may be better -- at least when it comes to hedge funds.

Bridgewater Associates, already the biggest U.S.-based hedge fund, pulled in more new money in the first half of 2010 than any of its rivals, industry magazine AR reported on Thursday.

U.S. hedge fund firms overseeing $5 billion or more saw their assets inch up 1 percent during the first half, according to the report. Among firms that manage only $1 billion or more, half said their asset levels either dropped or stayed unchanged.

Investors, including pension funds, currently appear more inclined to put money with large, long-established funds whose investment approach and risk management systems they trust, industry analysts have said.

Boasting $51 billion of assets, Bridgewater Associates, a 35-year-old fund firm founded by Ray Dalio, again ranked as the largest U.S. hedge fund as well as the industry's most popular, the magazine reported.

During the first half, the Westport, Connecticut-based firm took in $7.3 billion of new money, which boosted firm assets by nearly 17 percent. A year ago Bridgewater had $37 billion.

JPMorgan's asset management unit ranks as the industry's second-largest U.S.-based fund with $41 billion of assets. This marked a $2.7 billion gain since January, thanks to strong inflows into the company's fund business.

The magazine's findings underscore investor nervousness these days as many hedge funds, including some of the biggest, struggle with volatile markets and sluggish growth forecasts.

In the first eight months of the year, hedge funds returned roughly 2.7 percent, according to the AR Composite Index. The Standard & Poor's 500 Index has gained 2.66 percent this year with the Dow Jones industrial average rising 3.91 percent.

Concerns about performance have prompted many investors to hold off on making new investments. A small number of firms have started to trim fees to woo investors.

Hedge funds around the world oversee $1.9 trillion, down 28 percent from the industry's peak in 2008 when the financial crisis hit and hedge funds, like other investment managers, lost billions. U.S.-based fund firms manage the lion's share -- $1.2 trillion.

Paulson & Co, whose flagship fund had lost 11 percent through the end of August, ranked as the industry's third-largest firm with $31 billion, AR said. While that is down from $32 billion at the start of the year, it is up from $27 billion in mid-2009.

George Soros' Soros Fund Management; Och-Ziff Capital Management Group (OZM.N); BlackRock (BLK.N); Angelo, Gordon & Co; Seth Klarman's Baupost Group, and Thomas Steyer's Farallon Capital Management also ranked among the industry's biggest, each managing $20 billion or more, the magazine reported. [ID:nN30234598] (Reporting by Svea Herbst-Bayliss; editing by John Wallace)

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