Last year was quite a roller coaster for the hedge fund industry.

It started with a bang, and optimism reigned. Many were predicting that assets under management would once again eclipse the symbolically significant $2 trillion mark. But about halfway through 2011, the environment changed dramatically--for the worse. By the end of the year, the European debt crisis, continuing economic malaise and continued financial sector uncertainty had taken a painful toll.

For the year, the average hedge fund declined roughly 4 to 5 percent, which according to Eurekahedge was the second worst performance on record. The Eurekahedge Hedge Fund Index was flat to slightly negative in December, bringing the yearly number to -4.1 percent. The MSCI World Index was down nearly 10 percent for 2011.

Domestic indexes fared better, as the DJIA ended up about 6 percent, while the S&P 500 was flat. Inflows for the year were positive, about $67 billion domestically. Launch activity remained strong throughout 2011, with more than 1,100 hedge funds launching in the year (the second highest number of launches ever). Total assets under management, however, ended the year at a disappointing $1.7 trillion.

So what does this mean for 2012? The near-in outlook is not much better than the latter half of 2011. But perhaps we'll get another surprising mid-year turnabout--this time on the upside.

For more:
- here's the release

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