The tools that have worked so well for hedge funds in recent years—shorting and sophisticated trading models—worked beautifully up until last year, when hedge funds had their worst year on record.

With average declines of 18% in 2008; investors clamoring to redeem billions of assets; about 7% of the industry, or 700 funds, shutting their doors in 2008; and Bernard Madoff’s $50 billion ponzi scheme giving the industry a bad name, the outlook for hedge funds isn’t much better for 2009.

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