Hedge funds lost $40 billion in October

The global economic meltdown has walked back the hedge fund industry to where it was at the end of 2006, according to the latest data from Hedge Fund Research Inc. in Chicago. The industry, which was hovering close to $2 trillion at the start of the year, is now estimated to be worth around $1.5 trillion, according to HFR. In October alone, it lost $40 billion due to investor redemptions and another $115 billion worth of investment losses. This followed a third-quarter total industry asset reduction of $210 billion. Funds of hedge funds were hardest hit by investor redemptions last month, suffering $22 billion worth of outflows. Hedge fund industry performance is now being characterized as suffering the “largest” downturn in the industry’s history, Kenneth Heinz, HFR president, said in a statement. Through the end of October, hedge funds were down on average nearly 17%. The Standard & Poor’s 500 stock index was down 34% over the same period.