Hedge fund withdrawals top $269bn in 2008

The hedge fund industry posted an estimated outflow $148.4 billion in December 2008, according to a report by TrimTabs Investment Research and BarclayHedge. This surpassed the previous record outflow of an estimated $54.2 billion in October 2008. Total outflows from September 2008 to year end totalled an estimated $269.3 billion.

Hedge fund assets fell to $998.4 billion in December 2008 as a result of redemptions and poor performance. In December 2007 assets totalled $1.92 trillion. This is the first time industry assets fell below $1 trillion since July 2004 when they were $976.7 billion.

"Approximately two thirds of industry revenue comes from performance fees and we estimate that 81% of hedge funds were under water last year," said Conrad Gann, president and chief operating officer of TrimTabs. "Managers have half the assets to work with and those remaining assets need to fully recover prior losses before they can earn performance fees."

A number of funds are putting up redemption gates. BarclayHedge said it expects the redemption pressure to continue in the first quarter of 2009.