Investors in need of cash or traumatized by the Bernard Madoff scandal will continue to redeem hedge fund shares in droves, HedgeWorld News predicts, shrinking the industry by 30% this year to as low as $1 trillion. That was the size of the industry in 2005.

“I think we’ll have two quarter of significant redemptions,” Chris Manswer, global head of hedge funds-of-funds at AXA Investment Managers, told Reuters. “Because of Madoff and very difficult performance, a lot of funds will be receiving high levels of redemptions.” Hedge funds averaged declines of 19% last year.

At the end of 2008, the hedge fund industry stood at $1.4 trillion, after being hit with $152 billion in redemptions, or 9% of assets, in the fourth quarter. Last June, the industry was much larger—$2.7 trillion.

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