Hedge fund assets fell an additional 10.6% in December to US$1.84 trillion, down from a peak of US$2.97 trillion in the second quarter of 2008, HedgeFund.net estimates.

The asset drop was largely due to net redemptions and fund liquidations of a record US$221 billion during the month. As a result, HFN estimates that in the fourth quarter redemptions and fund liquidations reduced total hedge fund assets by US$471 billion while negative performance resulted in an additional US$185 billion loss.

For the full year 2008, net redemptions and fund liquidations accounted for an outflow of US$512 billion and performance losses accounted for an additional US$535 billion loss; a total industry asset reduction of US$1.05 trillion, or 36%, for the year, it said.

The HFN Hedge Fund Aggregate Average, an equal weighted benchmark of all single manager hedge funds and CTA/managed futures products in the HedgeFund.net database, was up 1.11% in December. Nevertheless, the index is down 15.3% for the year, meaning 2008 will go down as the worst year for hedge fund performance in history, it said.

Slightly higher global equity markets aided positive performance in December, HFN said. Other dominant trends during the month included sharply lower treasury yields and large declines in energy commodity prices which hurt funds investing in Russian markets. Commodities in general had volatile price swings in December and those more correlated to global economic growth fell most. Global macro and CTA/managed futures managers were able to post positive performance in this environment.

IE