(Adds details on data, reasons for moves)

By Nishant Kumar and Svea Herbst-Bayliss

LONDON/BOSTON, Jan 20 (Reuters) - Hedge funds attracted their highest global net inflows in seven years in 2014, and the total size of the industry has risen to nearly $3 trillion, hedge fund tracker HFR said on Tuesday.

Net inflows were $76.4 billion in 2014, the highest since 2007, the Chicago-based research group reported.

While overall flows were strong for the year, the pace of new money slowed dramatically in the fourth quarter, HFR said. Only $3.6 billion was added in the quarter, compared with $15.9 billion in the third quarter and $30.5 billion in the second quarter.

In 2013, hedge funds took in $63.7 billion, with $10.5 billion added during the last quarter, HFR said.

New money coupled with performance gains brought the size of the industry to $2.85 trillion at the end of 2014, according to HFR.

Industry experts attributed some of the fourth-quarter slowdown to lackluster returns, noting that hedge funds finished the year with a modest 3.3 percent gain, far less than the 9.13 percent return in 2013. They also lagged behind the rallying stock market, where low interest rates coupled with signs of economic recovery helped U.S. equities set a string of new highs last year.

While many institutional investors have said they plan to continue putting money into hedge funds, some may have gotten cold feet after the California Public Employees' Retirement System, the largest U.S. pension fund, said in September it will pull all of the $4 billion invested in hedge funds because it finds them too costly and complicated.

A survey by Goldman Sachs at the end of 2014 found that most hedge fund investors plan to pull some money from their current lineup of managers, citing poor performance. But the respondents also said they planned to put the money with better performing managers.

While academic research has long shown that smaller hedge funds often perform better, investors clearly favored larger, well-established players last year, with $38.7 billion in new money going to firms that manage more than $5 billion.

Firms that manage between $1 billion and $5 billion received $27.6 billion while the industry's smallest players with less than $1 billion in assets received $10.0 billion in inflows.

(Reporting by Nishant Kumar and Carolyn Cohn in London, Svea Herbst-Bayliss in Boston; Editing by Sinead Cruise and Jeffrey Benkoe)