A Financial Times blog post at Alphaville reports how 63 percent of respondents believe that the hedge fund deleveraging process is about half over (see Bloomberg article as well). To date, leverage has fallen to 142 percent of AUM, down from 175 percent in 2006 and 2007. A majority of respondents also believe that redemption requests are at least half over, with the process finishing up early next year, probably in the first quarter. Of interest is how cash now represents approximately 31 percent of total assets, compared to just 7 percent over the last few years. As we have discussed before (see previous post), there is an expectation that once the market turns, and redemption request slow down or stall, the amount of capital that could be deployed back into the market could spark a significant rally. Empirical estimates have between $650 and $700 billion withdrawn from hedge funds, and another $325 to $350 billion from mutual funds (see DowJones Financial News Online article). This amount of funds represents about 6.5-7 percent of the capitalization of the US equity market. Even just a small portion of such capital hitting the market could produce a relief rally that would be jaw-dropping.