Oct. 16 (Bloomberg) -- Investors withdrew a record $43 billion from hedge funds in September as they fled distressed-securities and stock funds because of poor performance, TrimTabs Investment Research said today.

The estimated outflows were the most since TrimTabs started tracking the industry in 2000, Chief Executive Officer Charles Biderman said in an interview. Investors pulled $14.4 billion from funds focused on troubled securities and $8.4 billion from equity long-short funds, which bet on rising and falling stocks, the Sausalito, California-based company said in a statement.

``We're told from some of our clients that most of the hedge funds have sold enough equities to cover the redemptions,'' Biderman said. ``There shouldn't be more forced selling.''

Hedge funds fell 4.7 percent in September, the $1.9 trillion industry's worst month since Long-Term Capital Management LP collapsed in 1998, according to data compiled by Hedge Fund Research Inc. The drop left funds down 9.4 percent for the year, which would be the biggest annual loss since the Chicago-based company began keeping records in 1990.

Hedge funds have attracted $55.6 billion this year, even with the September withdrawals, TrimTabs said. The research company's estimates are based on a survey of 1,639 funds.

Citadel Investment Group Inc.'s biggest hedge fund fell as much as 30 percent this year because of losses on convertible bonds, stocks and corporate debt, two people familiar with the Chicago-based firm said yesterday.

Kenneth Griffin, who founded Citadel in 1990, said in a letter to investors this week that returns for the $10 billion Kensington Global Strategies Fund may swing wildly as markets are battered by the global credit crunch.

Lee Ainslie's Maverick Capital Ltd., David Einhorn's Greenlight Capital LLC and The Children's Investment Fund Management LLP fell more than 12 percent in September as stock hedge funds posted record monthly losses and braced for client defections.

To contact the reporter on this story: Gillian Wee in New York at gwee3@bloomberg.net.

Last Updated: October 16, 2008 15:22 EDT