Facing market turmoil and investors redemptions, hedge funds have boosted their cash holdings to among their highest levels ever, according to new research.

Citigroup estimates that hedge funds have about 30% of their assets in cash, possibly their highest cash holdings ever. The bank said that hedge funds currently have about $600 billion in cash. Hedge funds held about 20% of their assets in cash prior to the outbreak of the credit crisis last year.

“I would not be surprised if today’s cash balances of around 30% turned out to be the highest proportion of cash hedge funds have ever had,” Matt King, global head of credit products strategy at Citi, told Financial News.

But the safety measure of large cash holdings may not be quite as safe as it seems. Some 17% of the cash holdings are in money market funds, Citi estimates, but even money markets are apparently not immune to the market gyrations. The $64.8 billion Reserve Primary money-market fund this week delayed withdrawals by seven days after being forced to write down $785 million in Lehman Brothers securities it owned.