"Performance of the hedge fund industry has declined over 17% since October 2007, making the current performance drawdown the largest in history," said Kenneth J. Heinz, President of Hedge Fund Research. "The industry has now registered five consecutive months of losses, another inauspicious first. Consolidation is likely to continue into 2009 as investors across all asset classes indiscriminately liquidate assets to move portfolios into cash holdings."

Investors withdrew over $40 billion from hedge funds in the month of October which, in addition to $115 billion in performance-based asset losses, reduced the industry capital base by $155 billion. Assets under management in the global hedge fund industry declined to $1.56 trillion at the end of October, a level last seen at the end of Q4 2006.

As of the end of Q3 2008, HFR estimates the entire hedge fund industry to contain more than 10,000 funds, which includes more than 7,400 single-manager funds.

More here at HedgeCo; Short Selling Outperforms FOHFs as Investors Withdraw Over $40 Billion from Hedge Funds