Hedge funds’ assets are likely to fall by over 20 per cent in 2009, according to International Financial Services London, an organisation promoting UK financial services worldwide.

Its annual Hedge Funds report indicates that in the first two months of 2009 hedge fund assets fell by 9 per cent, largely because of redemptions. The surge in withdrawals at the start of the year came as restrictions on redemptions in some hedge funds, particularly in the US, were lifted.

After a decade of growth averaging around 20 per cent a year, assets under management of the global hedge fund industry fell by nearly 30 per cent in 2008 to $1,500 billion. The decline was caused equally by negative performance and withdrawals.

The average hedge fund lost 15.7 per cent in 2008; three-quarters of hedge funds and 85 per cent of funds of hedge funds lost money during the year.

Hedge funds returned 13.2 per cent of assets to investors in 2008. This was owing to losses, risk aversion and reputational damage inflicted by the Madoff fraud.

New York remains the leading global location for management of hedge fund assets with a 42 per cent share in 2008, slightly up on the previous year due to bigger redemptions in Europe. London is the second largest centre with 18 per cent, nearly double its share in 2002.