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Hedge funds suffer biggest quarterly drop in assets since 2008: data

A Wall Street sign is pictured in front of the New York Stock Exchange, open during Winter Storm Juno, in the Manhattan borough of New York January 27, 2015. REUTERS/Carlo Allegri

By Svea Herbst-Bayliss

BOSTON (Reuters) - Hedge funds suffered their biggest quarterly loss in assets since the financial crisis during the three months that ended in September, data released on Tuesday showed, putting the industry on track for its worst year since 2008.

The secretive industry that caters to wealthy investors, including pension funds and endowments, saw assets shrink by $95 billion, or 3.9 percent, to 2.87 trillion in the third quarter, research and tracking firm Hedge Fund Research reported.

The declines were driven by heavy losses when markets were roiled by concerns about slowing growth in China, sliding commodities prices and a likely U.S. Federal Reserve interest rate hike.

Meanwhile, net inflows amounted to $5.6 billion, compared with the $21.5 billion added during the second quarter and the $18.2 billion added in the first quarter, according to HFR.

For the year through the end of September, the average hedge is down 1.5 percent, the worst showing since the end of the financial crisis but still less than the Standard & Poor's 500 roughly 7 percent loss over the same period. In 2011 hedge funds lost 5.25 percent after having tumbled 19 percent in 2008.

Declines at some of the industry's biggest funds are far worse than average, a fact that could fuel criticism of the industry's traditionally high fees.

William Ackman's Pershing Square Capital Management, one of the industry's most prominent activist funds which ranked among last year's best performers, for example, is down about 12.6 percent for the year after losses in August and September. He oversees roughly $16.5 billion in assets, down from roughly $20 billion earlier this year.

David Einhorn's Greenlight Capital, meanwhile, is off 17 percent for the year through September.

Hedge funds, unlike mutual funds, do not allow investors to pull their money out whenever they wish.

(Reporting by Svea Herbst-Bayliss; Editing by Richard Valdmanis and Grant McCool)