Early estimate has hedge funds off 18.9 pct in '08

BOSTON, Jan 8 (Reuters) - Hedge funds suffered their worst year ever in 2008, with the average fund losing 18.9 percent, hedge fund industry consulting firm Hennessee Group said on Thursday.

According to Hennessee's most recent estimates, the average hedge fund inched up 0.76 percent in December but was down nearly 19 percent for the year. The Standard & Poor's 500 stock index dropped 37 percent last year and the average stock mutual fund lost 37.53 percent, according to data from Lipper Inc, a unit of Thomson Reuters.

Declaring 2008 the "worst year by far," Hennessee analysts noted that the industry's second largest annual loss occurred in 2002, when the average fund lost 2.89 percent.

Hennessee Group has been tracking data since 1987.

Hennessee and other industry research groups like Hedge Fund Research and BarclayHedge expect to release their performance numbers for 2008 in the next days.

Many hedge funds suffered heavy losses both at the start of 2008 and in the early fall, when gyrating stock markets and Lehman Brothers' collapse hurt them.

Because the $1.5 trillion hedge fund industry is only loosely regulated, many large and prominent hedge fund firms do not report their performance numbers. This means the overall number reported by research companies like Hennessee might be misleading, industry analysts said.

Hedge fund managers and investors have said that many funds have lost half of their money. For example, Citadel Investment Group's preliminary numbers show that its flagship hedge fund lost roughly 50 percent in 2008, according to an investor who asked not to be named. In 2007, the fund boasted returns of around 30 percent. (Reporting by Svea Herbst-Bayliss, editing by Gerald E. McCormick)