Many hedge funds that placed orders for shares in Alibaba's (BABA) initial public offering received woefully small allocations, highlighting the ultra-selective process that favored investors who already have a close relationship with the company.

"It's pathetic," one hedge fund manager said Friday morning, a few hours before the Chinese e-commerce giant was expected to begin trading on the New York Stock Exchange. That fund requested $200 million in Alibaba shares and received less than $1 million worth, or one half of 1 percent of the amount requested, the manager said.

Some funds that requested smaller amounts also received tiny fractions of the quantities they requested. One fund that requested several million dollars in shares received just 1,000 shares, worth $68,000 based on the IPO price of $68 set Thursday evening.

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"We didn't feel like we got screwed," the second fund manager said, adding that his fund had attended the investor lunch but never had one-on-one meetings with Alibaba's senior management.

Alibaba's nearly $22 billion IPO is the largest in history and follows the high-profile debut of Facebook (FB) two years ago. Facebook ran into a trading glitch during its first session, and the stock traded down in the following months.

Alibaba is keen to avoid such a fiasco and has deliberately sought investors who are likely to hold the stock for the long term. A large percentage of Alibaba shares were given to mutual funds, and many investors who wanted to participate didn't receive any shares at all.

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A person familiar with the matter said that Alibaba's management and the underwriting banks spent nine hours yesterday going through investor orders. Investors with the longest relationship with the company tended to receive the best treatment, the person said. "If they were early believers they were treated differently than if they were new to the company," he said.

Not all hedge funds were disappointed with their allocations. "Some [hedge funds] were happy," said another manager whose fund participated in the IPO. "Management had a big say in the allocations," he said. "If there was a connection to the company they did fine."