I found the answer: To enable this feature it seems one has to go to: Site Administration > Development > Experimental and set "Enable group members only".
A quiz can now be hidden among groups.
I just want to make sure that this is indeed the right thing to do? What effect may this have on performance when say 100 groups are set up per course and as many quizzes are being hidden?
How severe may performance issues be? I refer to the note:
"If enabled, access to activities can be restricted to group members only. This may result in an increased server load. In addition, gradebook categories must be set up in a certain way to ensure that activities are hidden from non-group members"