Regulators may worry about banks being too big to fail, but investors are worrying about whether certain hedge funds are too big to succeed.
Take John Paulson's Paulson & Co., for example. Paulson oversees $32 billion in assets and is continuing to attract cash. But so much money can make it difficult for the fund to outperform its peers, as it becomes harder to locate investments that are big enough for consistent returns.
According to BusinessWeek, Paulson's main funds, which beat rivals in 2007 and 2008, have been overshadowed this year and last.
There are historical precedents. In 1998, Soros Fund Management and Tiger Management had more than $20 billion in assets. Two years later, both firms had tallied up losses and decided to scale back.
More recently, Citadel, which had managed $20 billion in 2008, crashed on its wagers on high-yield bonds. By the end of the 2009, it managed $12 billion.
If it seems like some funds are getting too big, maybe they are.