The 505 largest hedge fund managers in the world, each with more than $1 billion under management, control 90 percent of the industry's assets, research by Preqin showed on Thursday.

They collectively manage $2.39 trillion of the industry's $2.66 trillion in assets but account for just 11 percent of active firms, the industry tracker said in a statement.

"The increase in hedge fund assets is being driven by allocations from the largest investors in hedge funds, those which currently allocate more than $1 billion to the asset class," said Amy Bensted, head of hedge funds products.

"With these investors allocating approximately $650 billion to hedge funds, an 18 percent increase from this time last year, it will be important for hedge fund managers to attract inflows from these prominent institutional investors," she added.

Public pension funds make up 25 percent of the money invested by those institutions, with sovereign wealth funds at 16 percent, up from 7 percent a year earlier, and private sector pension funds making up 15 percent.

More than half of that capital is from institutions in North America, although this is down from 67 percent in May 2013, as institutionns in other areas increase their allocations, Preqin said.

Investors into the $1 billion plus club require, on average, a fund track record of 2.9 years and a minimum assets under management of $700 million before they will invest, Preqin said, with equity long/short and macro the most popular strategies.