LONDON (Bloomberg) - The largest hedge fund firms attracted the most capital as industry assets grew 4.4 percent to $1.67 trillion in the first quarter, according to Hedge Fund Research Inc. (HFR)

Firms managing $5 billion or more added $14.9 billion of investments in the three months through March, Chicago-based HFR said. Those with $500 million to $5 billion had net outflows of $3.7 billion in the period, HFR estimated.

"The overall concentration of industry assets increased," HFR said yesterday in an e-mailed statement. "Inflows were concentrated in the industry's largest firms."

While the largest firms account for just 5.1 percent of industry participants, they control more than 62 percent of hedge fund assets, HFR said. The industry attracted net inflows of $13.7 billion in the quarter, little changed from the previous three months, while investment gains added $54 billion to assets, the company said.

HFR's Weighted Composite Index rose 2.56 percent in the quarter, putting the industry within two percent of its high-water mark set in 2007, the company said. Hedge fund firms usually charge management fees and keep a percentage of profits once funds are above high-water marks, or the previous peak.

The industry's assets peaked at $1.93 trillion in June 2008, according to HFR data.