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Hedge-Fund Assets Fell Record 36% in 2008, Hedgefund.net Says

Date: Thursday, January 15, 2009
Author: Tomoko Yamazaki, Bloomberg

Hedge-fund assets fell a record 36 percent to $1.84 trillion in 2008 as tumbling global markets prompted investor withdrawals and fund liquidations, according to industry researcher HedgeFund.net.

Hedge funds lost $512 billion through withdrawals and fund closures, while performance losses totaled $535 billion, the New York-based unit of Channel Capital Group Inc. said in an e-mailed statement. The decline is the biggest since Hedgefund.net began tracking the data in 2003.

Funds including Citadel Investment Group LLC suffered losses and client withdrawals last year, with some selling assets at fire-sale prices as the global credit crisis forced banks to withdraw loans to the industry. While defections and closures reached a record in December, a benchmark of performance rose for the month after declining in previous months, Hedgefund.net said.

“Investor asset flows lag performance, and the sharp rise of outflows in the fourth quarter are the result of yearlong aggregate losses,” Hedgefund.net said in the statement. “Positive performance in December may be an indication that the biggest wave of investor outflows has passed.”

The HFN Hedge Fund Aggregate Average, an equal-weighted benchmark of all single-manager hedge funds and managed futures products, gained 1.1 percent last month, the data provider said.

For the year, the average declined a record 15.3 percent, compared with a record 42 percent slide by the MSCI World Index, which tracks shares in 23 developed nations.

Assets managed by the funds plunged from a peak of $2.97 trillion in the second quarter of the year, said HedgeFund.net, whose database includes more than 8,200 hedge funds, fund of funds and managers that trade futures, known as commodity trading advisers or CTAs. Withdrawals and liquidations totaled $221 billion in December.

Eurekahedge Pte, a Singapore-based hedge-fund research and publishing company, estimated earlier this week that the hedge- fund industry shrank by about a fifth to $1.5 trillion at the end of 2008, from a peak of $1.9 trillion.

HedgeFund.net plans to release a full report in early February.

2008 Estimated Hedge-Fund Asset Flow Table by HedgeFund.net

Date Total Quarterly Quarterly Performance Net flows*
Assets Change % Change Losses
Q1 08 $2,847.50 ($40.16) -1.39% ($93.78) $53.62
Q2 08 $2,972.99 $125.49 4.41% $91.28 $34.21
Q3 08 $2,497.28 ($475.71) -16.00% ($347.51) ($128.20)
Q4 08 $1,841.17 ($656.11) -26.27% ($184.99) ($471.11)


*Net flows refer to outflows from redemptions, allocations, launches, and liquidations. All figures are for single-manager hedge-fund assets.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net