In the not-too-distant past, it looked like hedge funds were poised to blast through the $2 trillion barrier (some estimates say the industry already has). But with hedge funds in crisis, Citigroup says they may have to settle for half that.

Worldwide hedge fund assets may fall to about $1 trillion by the middle of next year, which would be a year-on-year decline of almost 50%, analyst Tobias Levkovich wrote in a report on the industry. Investors are poised to pull some 20% of their money from an industry already battered by redemptions and double-digit losses.

“The so-called ‘Swiss hot money’ wants out and funds are responding,” according to Levkovitch. “Citi’s credit analysts estimate that hedge funds have raised cash to roughly 40% of assets already in anticipation of known redemptions and possibly unanticipated demands from investors.”

What’s more, the newer, smaller hedge fund industry may have to make do with less leverage to boost returns, Levkovitch predicts.

“The future of the hedge-fund industry looks set to be one in which leverage will not be used as aggressively, partially as a result of recent losses but also because the prime brokers will not provide it easily,” he wrote.