For the whole of 2008 net money outflows from the hedge fund industry amounted to USD158.91bn.

The negative outflows reading in the fourth quarter, combined with the overall broad hedge fund index performance of minus 10.21 per cent over the same quarter, produced a decrease in global hedge fund assets from a downwardly revised USD1.59trn at the end of September to USD1.29trn at year-end.

Cumulative net outflows suffered by all hedge fund sub-strategies in 2008 accounted for 11.43 per cent of beginning of year assets, up from 0.86 per cent recorded for the first three quarters.

All hedge fund sub-strategies posted negative money flows in the fourth quarter as the industry all at once faced the collapse of global equity markets, a rise in volatility to record highs, liquidity issues, and the failure of a number of key institutions.

The panic selling and deleveraging that followed, combined with changes in broker requirements and the enforcement of the ban on short selling in certain financial stocks made for a tough environment for many managers - including those with net short positions.

The fourth quarter was the worst of an annus horribilis that undermined investors' confidence, exacerbated also because of the eruption of the Madoff scandal in December, and marked the start of the crisis in the 'real' global economy, precipitated by the crisis affecting the financial sector since mid-2007.

In US dollar terms, the largest hedge fund sub-strategy outflows were experienced by long/short equity at USD42.52bn, managed futures at USD23.95bn, event driven at USD22.27bn, and multistrategy at USD16.64bn.

Combined outflows across these strategies amounted to USD105.39bn, or 72 per cent of the overall money flows in the quarter, compared to USD14.61bn of outflows from the same strategies in the third quarter.

Of the four sub-strategies posting the largest negative outflows in the fourth quarter, only managed futures had recorded positive inflows for the third quarter, with USD1.34bn.

In absolute terms the performance of the Credit Suisse/Tremont Hedge Fund Index in the fourth quarter 2008 came in at minus 10.21 per cent, the second worst quarterly performance since the index was launched.