Hedge funds declined by an average 0.7 percent in June, bringing the year-to-date loss to 0.75 percent, data compiled by Hedge Fund Research Inc. show. It’s the worst start to a year since the Chicago-based firm began tracking returns in 1990. The $1.9 trillion industry has posted one losing year, in 2002, when funds fell 1.45 percent amid the 23 percent decline by the Standard & Poor’s 500 Index.

With hedge funds producing such losses, investors forked over half as much to fund managers in the first quarter ‘08, $16.5 billion, as they did in the last quarter of ‘07, just over $30 billion.

So, the investment vehicle of the rich is also getting pinched in this global downturn. Though funds that invest based on views of the global economic outlook were able to hit double-digit returns this year. This from the Financial Times:

These so-called macro hedge funds, which attempt to identify extreme valuations in stock markets, interest rates, foreign exchange rates and commodities, have shown returns of more than 12 per cent this year, outperforming the S&P 500 index by about 17 per cen.

To identify extreme price valuations, macro hedge fund managers generally employ a global approach that concentrates on forecasting how global macroeconomic and political events affect the valuations of financial instruments.

Worries about the state of the US and world economy show few signs of easing. A recent survey of more than 70 US hedge fund managers and their advisers has found that most have a broadly pessimistic view on the prospects in 2008 for the country’s economy, which 80 per cent expect to be flat or in recession by the end of the year. Many expect the Federal Reserve to raise interest rates rather than lower them further.

Swiss bank UBS makes front-page news on The Wall Street Journal for its thumping quarterly loss of more than $12 billion on write-downs of $19 billion. The losses have claimed chairman Marc Ospel.

– USA 2008: The Great Depression

Brit newspaper The Independent leads with “dismal projections” that in the fiscal year starting in October, 28 million people in the US will rely on government food stamps to survive, the highest level since the food assistance programme was introduced in the 1960s.

– Paulson plan will be DOA

Paulson plan will be “dead on arrival”, according to The New York Times, as “lawmakers and lobbyists from an array of industries” oppose to the plan to create a new financial regulatory system in the US.

– London stocks lift despite UBS writedowns

Shares in UBS and British banks Barclays, Royal Bank of Scotland and Alliance & Leicester rise in London, despite heavy writedowns for the Swiss banking giant.

– Worst month for hedge funds since LTCM collapse

Figures from Chicago-based Hedge Fund Research show that the average fund tracked by its HFRX index was down 2.4% in March, its worst month since the collapse of Long Term Capital Management in 1998.

– Gas prices at record high

High crude oil prices are being passed on to US consumers. From Rueters: “The U.S. retail price for gasoline set a new high of $3.29 a gallon after rising 3.1 cents over the last week, the federal Energy Information Administration said on Monday.”

– Oil slides, dollar climbs

Oil is back at $101 a barrel as the euro fell to a six-day low against the greenback.

– Gold falls for fourth day

The yellow metal fell for the fourth consecutive day to $896.75 a troy ounce.