Hedge fund assets under management declined by nearly a trillion dollars last year while $150 billion was withdrawn from hedge funds in December. 

From The Financial Times

Investors pulled close to a net $150bn from hedge funds last month in spite of moves by dozens of funds to halt or suspend redemptions.

The record December figure, equivalent to about 10 per cent of industry assets, extends the run of outflows to four consecutive months and has increased the total net outflow for 2008 to $200bn.

The size of the once lucrative industry has almost halved in the past year, to $1,000bn under management, according to data from TrimTabs Investment Research and Barclay Hedge.

Conrad Gann, chief operating officer of TrimTabs, said he foresaw more redemptions in the first quarter of 2009.

"We expected December hedge fund redemptions to be significant, but the results are still surprising . . . twice the peak equity mutual fund outflows in September at $72bn," he said.

The hedge fund industry was clearly "under duress", Mr Gann said. "Approximately two-thirds of industry revenues comes from performance fees and we estimate that 81 per cent of hedge funds were underwater [reported negative returns] last year . . . Managers have half the assets to work with and remaining assets need to fully recover prior losses before they can earn performance fees." ...

The size of the industry has fallen because of performance losses as well as investor redemptions. The average fund lost 21.7 per cent in 2008, according to Morningstar 1000 index. That is based on the 1,000 largest funds, which account for 90 per cent of industry assets.

And given the way markets have been behaving the past week, I imagine that more assets are being liquidated as the financial system continues to de-lever.