Last Month, $40 Billion Pulled From Hedge Funds

Investors withdrew $40 billion from hedge funds last month amid the stock market's crushing declines. Coupled with $115 billion in losses, the industry's assets fell by the biggest one-month amount on record, according to Hedge Fund Research. The once-hot industry, which managed $1.56 trillion as of Oct. 31, has seen numerous funds shut because of big losses this year, and the number of funds is expected to be nearly halved to around 5,000 before the dust settles. The $155 billion drop in hedge funds' assets follows a $210 billion decline in the third quarter. Year-end redemption requests from investors, meanwhile, are expected to be massive. Funds unwinding positions amid the looming redemption requests and increased difficulty in borrowing money have been among the reasons cited for the stock market's swoon over the past two months. October's withdrawals were broad and resulted in four fund types seeing net outflows for the year: equity hedge, event driven, relative value and macro. The latter bets on global economic trends and saw $11 billion in net outflows for the month even as such funds are up 4% year-to-date, said Hedge Fund Research. The investments known as "funds of hedge funds," which invest in several other funds, saw $22 billion in withdrawals. That group's performance is negative 18.5% this year. Hedge Fund Research said its composite hedge-fund index fell 6% in October, which was less than the major U.S. stock indexes.