The ongoing market turmoil has left few survivors in its path of financial devastation with financial institutions, corporates and regulators all hard hit. It should come as no surprise that hedge funds delivered their worst first-half performance on record during the first six months of 2008.

As a group, hedge funds declined by 0.68 in June, and their decline so far this year is now 0.75 per cent, according to industry tracker, Hedge Fund Research - worse than any comparable period since HFR started tracking returns in 1990.

However, the decline is much less painful that that of other asset classes. During the first half of the year, the 30-stock Dow Jones Industrial Average fell 14.4 per cent, while the broader S&P 500 declined 12.8 per cent.

Despite the difficult market climate, hedge funds still appeal to investors. During the first quarter, hedge funds attracted USD16.4bn in net assets. While that might be down from USD60.2bn a year earlier, it indicates strong investor faith in a dismal economic environment.

With the onset of a bear market in stocks, interest has been shifting from equities to alternative energy and emerging markets. Investors have become less tolerant of losses and are allocating assets to managers who have demonstrated they can thrive in turbulent markets.