We provide evidence that diseconomies of scale for hedge funds are driven by the aggregate assets pursing particular investment strategies. This study extends Forsberg, Gallagher and Warren (2021) who identified skilled managers with persistent performance by forming peer cohorts of hedge funds using return correlations. Our analysis related fund performance to total assets, showing a significant negative relation with cohort size, but not with individual fund size except where the fund faced limited competition. We also document a weaker relation between performance and inflows where funds faced less competition, suggesting that cohort structure might influence propensity to accept additional assets.