An orgy of “panic selling” has seen the share prices of listed hedge funds “fall off a cliff” in recent weeks, highlighting dramatically waning sentiment towards the hedge fund sector and threatening the credibility of the closed-ended structure.

The net asset value of the vast majority of hedge funds and fund of funds listed in London – the epicentre of the global industry – has fallen this year. But tellingly, share prices have tumbled much further with average discounts to NAV surging to 20 per cent from just 1 per cent in early September.