The Hennessee Hedge Fund index declined 2.69 per cent in November (down 18.44 per cent YTD), while the S&P 500 declined 7.48 per cent (off 38.97 per cent YTD), the Dow Jones Industrial Average fell 5.32 per cent (down 33.44 per cent YTD), and the NASDAQ Composite Index sank 10.77 per cent (off 42.09 per cent YTD).  Bonds advanced, as the Lehman Aggregate Bond Index increased 3.30 per cent (up 1.50 per cent in the year).

Lee Hennessee, managing principal of the US-based hedge fund advisory group, said: “While not an attractive absolute return, many investors are thankful to have hedge fund allocations this year, especially when compared to traditional asset classes.”

Charles Gradante at the firm said: “We expect year-end investors’ redemptions to be significant, with the average fund returning 15 to 25 per cent of investors’ assets.  When you consider the significant number of liquidations, redemptions and the negative performance of hedge funds this year, it is possible that the entire hedge fund industry could start 2009 at 40 per cent of the size it was at the beginning of 2008.

“Japan looks like it may enter the worst recession since World War II, with serious risk of contagion to the rest of Asia and the globe.  The Bank of Japan must decrease rates in order to stimulate the economy.”