The opposite also proved true, with the worst-performing small funds losing 39 percent a year between 2001 and 2010. Big hedge-fund laggards had average losses of 27.6 percent over the same time period.

"Investors should choose their small funds wisely," Barclays analysts wrote in the report. "If they select winners, they have the potential to win big, but if they falter, the downside is comparatively greater than larger funds."

Volatility in financial stocks hurt large managers like Paulson and Lansdowne last year. John Paulson, 56, who made billions of dollars betting against the U.S. housing market in 2007, incurred losses of 51 percent last year in one of his firm's biggest hedge funds on investments in Citigroup Inc. and Bank of America Corp. Lansdowne, a stock-trading firm based in London, was down 20 percent in its biggest fund after making bullish wagers on banks including Lloyds Banking Group Plc.

Big Funds Rebound

Paulson addressed his critics in a letter sent to clients this month, saying "some people have suggested that our negative performance in 2011 was due to our size." The firm "outperformed the markets and our peers" in 2008, 2009 and 2010, all years when the hedge fund was bigger than it is now, according to the letter, which was obtained by Bloomberg.

To be sure, both Paulson and Lansdowne have done well in 2012 as falling U.S. unemployment and the European Central Bank's help for lenders pushed the MSCI World Index to its best start to the year since 1994. Paulson's Advantage Plus Fund rose 5 percent in January and Lansdowne's U.K. Equity Fund gained 5.6 percent, the most since May 2009, according to Bloomberg data. Hedge funds broadly rose 2.6 percent last month, the industry's best January since 2006, according to Hedge Fund Research.

Paulson has reservations about the bull market, telling clients in his letter that Greece may default by the end of March and trigger the breakup of the euro and a global recession. His skepticism is matched by Liongate Capital's Funk, who cited the dangers of debt woes worsening in Portugal, Italy and Spain and U.S. joblessness rising.

Liongate says that even if larger funds correctly predict a downturn, they may be too big to easily change course and protect their returns.

"There are lots of reasons why it will be a bumpy, highly correlated year" that benefits smaller managers, Funk said.

The Chicago Board Options Exchange Volatility Index, which rises when investors predict price swings for stocks will increase, jumped to a two-year high of 48 in August after Standard & Poor's cut the U.S. government's credit rating. The gauge has since declined to 21 as of Feb. 15.