A new study from Hedge Fund Research (HFR) also showed that the lowest number of funds was launched over this period than at any time since 2000, as the ongoing credit crunch continues to afflict the sector.
The closure rate is also 23 per cent above that of Q1 2007.
Commenting on the new research, HFR president Ken Heinz said: "Investors continue to express a preference for funds with established track records and significant infrastructure."
The downwards trend also looks set to continue: a recent change in market sentiment over future interest rates has also caught some fund managers out over recent weeks, causing further "heavy losses".
Speaking to the newspaper, an anonymous hedger complained: "We quite like volatility. We like recessions and we like soup kitchens, because that's when we make our money.
"But too much volatility just makes people scared."