The hedge fund industry had net inflows of $41.1 billion in the third quarter, approaching $1.73 trillion in assets under management, according to research from Lipper.
The Lipper Tass hedge fund database said third quarter net inflow was the third highest of any quarter.
"Growth came from ongoing institutional allocation in a period of heightened volatility across many asset classes," the report said.
Hedge funds saw net inflows of $101.1 billion through September of 2007.
The industry's assets under management exceed the combined gross domestic product of all the world's low-income countries and has approximately one-tenth of the market value of all domestic shares listed on the New York Stock Exchange, Lipper said.