Fundamental change is about to hit the hedge fund industry, exposing, in particular, the limits of size. While the cracks of this seismic shift are beginning to emerge, the return of the bear market will see large hedge funds affected the most, forcing them to either return capital to investors or break up into smaller funds to achieve a more optimal size for generating investor returns.

The hedge fund industry today has more than 10,000 single-manager funds with almost $2 trillion under management. Of these, just over 300 firms have in excess of $1bn and account for more than 60% of total assets.