Most hedge fund managers are eager to market their funds and grow assets overall. After all, many charge a management fee of 2 percent on total assets brought into the firm. That’s why large hedge funds like Paulson & Company, Millennium Management and Och-Ziff Capital Management Group were only too happy to cash in on the flight to safety in size when investors became nervous during the financial crisis.

But now as markets improve and more money flows into mid-sized and even smaller funds, some managers are actually rejecting new investors and capital, opting instead to hold the limit on their size to stay nimble, according to a post at DealBook.

One example is Lakewood Capital Management, run by manager Anthony Bozza. Lakewood is reportedly closing its doors to new investors after assets swelled from $200 million to $900 million in little more than a year. The $21 billion fund Farallon Capital Management, Brenner West Capital Advisors, Jericho Capital and the Redmile Group are all turning folks away at the door as well.

“There was a period where the bulk of the money was flowing to the very largest players, and now it’s trickling down,” said Dean C. Backer, global head of sales and capital introduction at Goldman Sachs in prime brokerage. “From the manager’s perspective, there are folks who really just want to be disciplined in terms of how they build their business.”

Smaller means nimble. Smaller funds can move in and out of markets faster than larger funds, and concentrate their investments on their best ideas. And since many of these smaller hedge fund managers are engaging in newer, more innovative strategies, staying small and nimble helps them stay on track with their strategies.

It also, of course, makes their funds even more attractive to outside investors, should they launch other funds. It’s the old exclusivity and scarcity principle at work. People want what they cannot have. It remains to be seen whether the scarcity of closing your doors to new investment will indeed translate into greater success with launching new funds, among these mid-size and boutique hedge fund firms.

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