Hedge funds were in rude health early in 2004, attracting new capital of more than $10bn (€7.5bn) in the first three months. They end the year with returns little better than cash and investors wondering where it all went wrong.

Urs Wietlisbach, partner and co-chairman of Partners Group, the Swiss alternative management firm that manages $6bn in alternative assets, said: "This has been a miserable year for hedge funds."