The average hedge fund lost 3 basis points last month, according to the Credit Suisse/Tremont Hedge Fund Index, capping the hedge fund industry's worst year.

The index, which Credit Suisse Tremont Index LLC, a joint venture of Credit Suisse Group and Tremont Capital Management Inc., released last week, fell 19% last year.

The financial crisis spurred investors to convert holdings to cash and some funds faced unexpected disruptions to their trading strategies, including temporary bans on short selling stocks.

Oliver Schupp, a Credit Suisse executive, said hedge funds could not eke out a gain for December despite a late-month stock rally.

Managed futures posted the best performance last month, gaining 2.4%. The sector also had the best performance for the year, with an 18% increase. Dedicated short-bias funds posted a 1.7% loss last month but rose 15% for the year.

The Equity Market Neutral index was the year's worst performer, falling 40%. Much of that drop was incurred in November.

The hedge fund index dropped 4.15% in November and posted record drops in October and September.

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