By Scott Ronalds

We've mentioned in recent blogs and podcasts that there's a lot of money sitting on the sidelines as tired investors have been pulling out of the market. With the year-end numbers now rolling in, here are some figures worth noting:

• Canadian investors redeemed over $14 billion from mutual funds, the largest year ever of net redemptions. It was also the only calendar year that the industry suffered net outlows since figures were first reported in 1995 (source: IFIC).
• U.S. investors withdrew $194 billion from stock and bond funds (source: Bloomberg). $72 billion was redeemed from domestic equity funds in October alone.
• $155 billion was pulled out of hedge funds worldwide in what was only the second time since 1990 that the industry suffered net outflows (source: Yahoo Finance; Hedge Fund Research). The redemptions were equivalent to roughly 10% of the industry's total assets.

While some of this money went to ETFs and other investment products, a good chunk of it is sitting idle in cash (and equivalents). In Canada, for example, money market fund assets grew by 33% in 2008 to over $70 billion.  Total money market mutual fund assets in the U.S. totaled a whopping $3.8 trillion at the end of the year (up 24% from the beginning of the year).

The extent of these redemptions is a good reflection of the level of fear among investors. At some point, however, sentiment will shift and a portion of this money will be re-deployed in the markets. With a mountain of cash in the waiting, one key ingredient for a healthy rebound is well in place.