Welcome
Nervous investors fled hedge funds as the market meltdown got underway, setting records for investor redemptions and asset declines in the third quarter, according to a report from an industry research firm issued Friday.
Hedge Fund Research, a Chicago-based firm, said investors took out more than $31 billion in the quarter, the largest net capital redemption in the industry history.
That contributed to a record $210 billion decline in industry assets in the quarter, most of it from investment losses, the firm said. The quarterly drop was more than last year's total record inflow of $194 billion.
For the first nine months of 2008, funds have registered a net capital decline of $2.5 billion.
The firm said September, which saw such events as the Lehman Brothers bankruptcy and government intervention in Fannie Mae, Freddie Mac and American International Group, was the second worst month in industry history. It said funds lost 5.5% last month, second only to the 8.7% drop in August 1998.
Total capital in the entire industry shrunk to $1.72 trillion at the end of the third quarter, down from $1.93 trillion at the end of the second quarter.
An index developed by Hedge Fund Research indicates that this year could result in the first annual hedge fund performance decline since 2002.
"With losses continuing through October, it appears that 2008 will be the worst year on record for both hedge fund performance and industry asset flows," said Kenneth Heinz, Hedge Fund Research's president, in a statement.
