This has been a testing year for hedge funds. Rollercoaster volatility fed many strategies, such as global macro, leaving only a few caught on the wrong side of the gale nursing huge losses. For the year so far, the S&P 500 US index has posted returns of -19.7%, while the MSCI EAFE Index, which covers the rest of the world, is down -25.7%. This spectacular fall in the equity markets has been one of the reasons behind the flow of assets into hedge funds. So far this year, $22.3bn (&euro25.4bn) has flooded into hedge funds, according to Tass Research. It was only $8bn in 2000.

Then came September 11, which saw the US markets close following the terrorist attacks in America. Most hedge funds' performance remained unscathed. Hedge funds have returned 2.6% for the year to date, according to the Credit Suisse First Boston/Tremont hedge fund index, although some strategies have performed better than others. Robert Sloan, chief executive of Credit Suisse First Boston Tremont Index, says: 'Absolute return strategies continue to provide risk diversification during this remarkably volatile time in the markets.'