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The era of the hedge fund monolith is upon us. Flush with institutional assets, the world's biggest hedge fund managers are amassing vast pools of capital. No longer are the industry's very top funds driven by the personalities and investment philosophies of their founders. Increasingly, they have become institutions in their own right. As overall hedge fund asset flows taper off, these multibillion-dollar managers are pulling away from the pack. The firms that make up Alpha's 2006 Hedge Fund 100, our fifth annual ranking of the world's biggest hedge fund management firms, collectively oversaw $720 billion in single-manager hedge funds as of December 31, 2005. That's up from the $568 billion in assets managed by the 100 firms on our list a year ago.

The 26.8 percent increase in assets in 2005 is the lowest percentage gain we've seen -- the growth rate was about 30 percent in each of the previous three years. But don't be fooled. The grip of the biggest hedge funds is getting tighter. The Hedge Fund 100 firms accounted for 65 percent of total industry assets -- which Chicago-based Hedge Fund Research estimates to have been $1.1 trillion at the end of 2005 -- up from 58 percent the previous year and 54 percent at the end of 2003...

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The Hedge Fund 100
  Firm/Fund Return
Rank capital net of
2006 2005 Firm/Fund name(s) ($ millions) fees (%)
1 3 Goldman Sachs Asset Mgmt (New York, NY) $21,023
3 7 D.E. Shaw Group (New York, NY) 19,900
7 9 Och-Ziff Capital Mgmt Group (New York, NY) 14,300
Och-Ziff Master 11,500 8.9
Och-Ziff Europe 1,800 16
Och-Ziff Asia 1,000 14.5
15 16 Cerberus Capital Mgmt (New York, NY) 11,200 5  
22 23 Brevan Howard Asset Mgmt (London, U.K.) 8,975  
    Brevan Howard Master Fund 8,754  
94 74 Appaloosa Mgmt (Chatham, NJ) 3,700
Appaloosa 25.7
Palomino 26
98 -- Third Point Partners (New York, NY) 3,600
Third Point Offshore 2,400 17.9
Third Point Partners 473 19.9
Third Point Ultra 259 27.6
Third Point Partners Qualified 238 16.5
Third Point Resources Ltd 148 12.9
98 -- Zazove Associates (Incline Village, NV) 3,600  

Only the five biggest funds managed by each firm are shown in the table. Italics indicate that a composite is shown or that multiple funds have been combined.

All assets and returns are as of December 31, 2005, unless otherwise indicated.
* Alpha estimate.

5 Excludes $4.7 billion invested in private equity format funds; does not include $600 million in equity capital at Ableco, a corporation doing loan originations.