BOSTON (Reuters) - Team-based hedge funds lost billions in cash and some of their cachet this year, creating an uncertain future for a strategy that had long been an industry darling.

Since January, investors pulled some $7 billion in assets from so-called multi-manager funds, data from research firm eVestment show. This marks a sharp reversal for a strategy whose promises of diversified strategies and strong returns drew in $56 billion in new cash in 2015.

This year’s outflows are already the biggest since the financial crisis and more could come in December, often the month investors make their biggest withdrawals from hedge funds, said eVestment’s head of research Peter Laurelli.

Worrying investors is a perception some portfolios are not truly diversified in the $490 billion sector, having several managers but only one focus, with leverage, or borrowed money, exacerbating losses where risks were not properly controlled.

“There are potentially larger factors at play than what the performance has been,” Laurelli said, adding that this year’s broad spectrum of returns “makes for a difficult allocation environment in the future.”

Headlines of growing losses have dogged some big multi-manager players for months. On Tuesday, Blackstone Group LP said it would shut its $1.8 billion Senfina Advisors after losing 24 percent this year. Leucadia National Corp-backed Folger Hill Asset Management is down about 15 percent through November. Earlier this year Deimos Asset Management, once associated with Guggenheim Partners, and Visium Asset Management both said they were shutting down.

Even some of the industry’s traditionally best performers are delivering only modest returns. Citadel’s flagship Wellington fund is up 3.14 percent this year through November. Millennium Management’s International Fund is up about 2.9 percent over the same period. Balyasny Asset Management’s funds are off between 1 percent and 2 percent.

“What we saw this year was that some funds weren’t really running multi-strategy funds that were truly diversified but rather they were running one strategy with many managers,” said one investor not authorized to speak publicly.

For investors these funds long held the attraction of investing with hedge funds and getting exposure to various strategies at one firm, analysts said.

As money poured into the sector, it became tougher to make money. “When everyone jumps on the bandwagon, that’s when the wheels come off,” the investor said.

Now they may have to look at smaller funds that play in more niche-oriented strategies. And here there were some winners.

Verition Fund Management, which oversees $365 million, is up 5.5 percent his year after a 14.3 percent gain in 2015, a person familiar with the situation said. The firm runs strategies that bet on appraisal rights arbitrage, Canadian convertible arbitrage and ETF arbitrage.

Crestline Summit Equity Alpha, a 12 portfolio manager, $375 million strategy gained 5 percent through November, a person familiar with the fund said. Ari Glass’ Boothbay Fund Management is up roughly 4 percent this year after a 10 percent gain last year, with a maximum drawdown of 1.4 percent when other funds lost a lot more.

“Being up 4 percent isn’t exactly killing it but considering what the bulk of the players are doing, that is pretty good,” another investor who is not authorized to speak publicly said.

The average multi-manager fund is up 2.8 percent this year, compared with the S&P 500 Index’ 10.8 percent gain.

Firms mentioned in the story either declined to comment or did not return calls seeking comment.