Hedge fund assets could fall to $900 billion by the end of 2009 from $1.93 trillion recorded in the first half of 2008, Wealth Bulletin reports.

The reason for the drastic fall could be attributed to the sharp rise in redemptions and poor performance of the sector that has battered the industry through 2008.

A Morgan Stanley report said 25-30% redemptions could be expected from European and Asian hedge funds, 15-20% from U.S., combined with negative performance of 15-22% in H2 of 2008, driving the HF shrink trend. “We think Europe will be higher due to shorter liquidity terms, [and] a bias to high net worth individuals and fund of hedge funds with leveraged notes, but we also see the U.S. rate increasing for those with shorter redemption periods too,” the study said.

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