Hedge funds severely trimmed in 2008

Count the once hard-charging hedge fund industry as another casualty of last year's worldwide financial tumult. According to preliminary data from Hennessee Group LLC in New York, total hedge-fund assets declined by 39% to $1.21 trillion in 2008 — their lowest level since 2006. Investor redemptions of $399 billion represented the largest contributor to the asset shrinkage, while negative performance accounted for $382 billion of the total $781 billion reduction. The year’s redemptions marked the largest ever for the hedge fund industry and stood in stark contrast to 2007, when $278 billion worth of inflows represented an 18% increase. The 19% asset reduction attributed to performance is the worst that Hennessee Group has seen since it started tracking the industry in 1987, according to Charles Gradante, co-founder of the hedge fund advisory firm. “A number of high profile funds liquidated or froze redemptions, which was a tactic historically employed by hedge funds with smaller capital bases,” he said in a statement. “Compounding the matter further, the industry was hit by the largest Ponzi scheme in history,” Mr. Gradante added, alluding to the $50 billion scheme alleged to have been perpetrated by Bernard Madoff.