Hedge funds are set to record their worst monthly investment performance since near the turn of the millennium, despite widespread predictions that the industry is booming and heading for stellar full-year profits.

According to preliminary figures up to November 29 from Hedge Fund Research (HFR), a specialist American research firm, every hedge fund strategy was generating losses for its investors.

HFR, which will publish a comprehensive monthly performance update this week, said that its $1.33 trillion (£644 million) Global Hedge Fund Index had lost 2.6 per cent of its value in the first 29 days of last month as funds were battered by huge volatility in global markets.

The worst-performing strategies were in equities, with HFR’s Equity Hedge index falling more than 4 per cent over the month. Hedge fund strategies such as “event-driven” investing and convertible arbitrage all lost money. The firm’s indices for these strategies finished about 10 per cent higher in 2006.

These are the biggest losses for the HFR Global Fund index since April 2000, when the bursting of the dot-com bubble led to the index falling by 3.85 per cent.

In August unfolding turmoil in the credit market pushed the index down by 2.55 per cent.

These two months are the only times this year that the index has fallen by more than 2 per cent and raised suggestions that hedge funds had been wrong-footed — particularly those that used “black-box”, or automated trading techniques. For the year to date, each of HFR’s indices is in positive territory, with the best performer, the Absolute Return index, up almost 6.6 per cent.

Taco Sieburgh, head of research at Liability Solutions, a hedge fund consultant, said: “With equity markets, commodity markets and credit markets all showing negative returns, it is not surprising the alternative space showed modest declines in November. That does not negate the long-term appeal of an allocation to the sector.”

Mr Sieburgh pointed to speculation in August, which was disproved later, that hedge funds were heading for an unprecedented blow-up.

Some hedge funds reported positive returns for November, despite the gloom suggested by HFR’s figures.

Man Group’s flagship AHL Diversified delivered a 4.26 per cent return last month at the latest count, the world’s largest listed hedge fund manager said last week.

For the year to date, AHL Diversified has returned 24.79 per cent, the fund said.

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