The hedge fund industry has made its worst start to the year since 2002, generating net returns of 1.06% in the six months to June, according to Hennessee Group, the data provider.

Performance over the first half of 2005 contrasts with the first half of 2004, when Hennessee's index was up 2.28%, and the comparable period in 2003, when it was up 8.98%. It fell 1.49% in the first half of 2002.