The flight out of leverage and the desperate desire among investors to preserve capital during the third quarter of 2008 has had a radical impact on asset-class returns. Based on tracking performance of broad market indices across 23 asset classes compiled by Pimco, it is clear there have been no safe harbours from the credit crisis.

Very small returns were to be had in just six asset classes, led by non-US bonds, hedged into dollars, which gained 2.4% year-to-date (according to the JPMorgan Non-US Hedged Index), thanks to the bounce in the US dollar.

Cash came in second, returning 1.6% (as measured by the Citi three-month T-bill index). Non-US bonds (unhedged), Treasury inflation-protected securities and US bonds as measured by the Lehman Aggregate Index all delivered barely positive returns. All of these bar cash lost money in the past three months to boot.

The only other asset class to deliver a positive return so far in 2008 has been real estate, with the Dow Jones Wilshire Reit Index up 1.2%, on the back of a 4.8% gain in the third quarter. In fact, only one asset class has actually performed better in the past three months (but earlier negative performance leaves it in the red year-to-date): US small-cap value stocks, represented by the Russell 2000 Index, which gained 5%.

Otherwise the story is one of unbroken dismay, both in year-to-date terms and over the past quarter.

Emerging-market equities have lost the most value, with the MSCI Emerging Markets Index down 36.4% for the year, and down 27.2% in the third quarter. The losses in international equities, German equities and Japanese equities are nearly as dire. US and UK stocks, large and small, growth and value, are in the red (the Russell Midcap Growth index dropped 23.4% year-to-date, while the S&P 500 is down 19.3%), as is US credit and high-yield fixed income.

The news is not quite as bad for alternative investments, which in most cases did relatively better than long-only equities or bonds. The exception is commodities; although ôonlyö down 8% year-to-date, commodities had an atrocious third quarter, with the Dow Jones AIG Commodities Index losing 27.7%.

Private equity has held its own, however, with the Cambridge Associates US Private Equity Index only down by 0.3% year-to-date; venture capital has also registered only minor losses.

The news for hedge funds is mixed, but poor, as measured by Credit Suisse/Tremont. Some hedge strategies have almost broken even, including equity market neutral (down a mere 0.1% year-to-date); convertible arbitrage (a 2.8% retreat); and managed futures (losing 3.4% year-to-date).

According to EDHEC, which provides its own database of hedge-fund strategies in the US, only two have delivered positive returns year-to-date: short selling (up 15%) and CTAs (up 7.4%, but down -.33% in the month of September).

The CS/Tremont and EDHEC indices show, however, that all other strategies have been flattened. According to CS/Tremont, emerging-market strategies have lost 14.5% year-to-date; long/short equity is down 9.6%; multi-strategy is down 9.1%; and global macro is 8.4% in the red. Furthermore, in all four cases, the third-quarter results were even worse than the annual results. The CS/Tremont total index is down 8.0% year-to-date, with a horrendous third quarter that saw it lose 10.3%.

And according to EDHEC, four strategies suffered the worst performance in September ever recorded: convertible arbitrage, equity market neutral, global macro and long/short equity.