The weather in London today is cold and rainy but some of the best money-managers in the City (London’s Wall Street equivalent) have some compelling ideas and comments about the ongoing global financial crisis and prospects for 2009.

On Wednesday, I visited several large, established British hedge funds and managed futures advisors. Both breeds of alternative investments are different.

Hedge funds, which have plunged about 20% this year, have become the markets’ whipping boy as Congress and market regulators seek to curb their “black box” mentality and impose greater rules, especially on leverage. The industry is estimated to have lost about 20% of its assets this year, including high profile losses for many managers.

Managed futures or Commodity Trading Advisors (CTA) trade over 100 global futures and options markets 24 hours per day typically using trend-following models generated by computers. Managed futures are the only subsector of the alternative funds industry to actually post a gain in 2008, up about 10% thus far. More than any other asset class, futures strive amid extreme market volatility as trends emerge on both the long and short side of the market. And, unlike hedge funds, futures are highly liquid.

By far my most interesting encounter was with a global macro long/short hedge fund manager who is one of the best stock-pickers in the world since 2001. This British manager has gained a cumulative 364% over the last seven years with no calendar losses and is up a spectacular 27% in 2008, mostly from shorts. His minimum investment is $500,000.

According to Mr. X, the link between central banks and commercial banks has been broken and will take time to repair. There remains a huge degree of distrust among counter-parties and banks are still flush with toxic assets. His macro view is bearish, forecasting another difficult year in 2009 coupled with high volatility and an environment of declining corporate profits. He remains net short of the banks, investment banks, money-management companies and utilities. This manager is also shorting, or betting against, Berkshire Hathaway believing the Oracle of Omaha’s insurance unit will suffer losses coupled with bad bets on derivatives.

Though Mr. X believes we’ve already witnessed the bulk of the stock market’s decline, he still thinks trading the market on a net short basis is the smartest strategy in 2009.

The managed futures team I visited doesn’t employ a directional strategy based on market fundamentals. Rather, it is a trend-following strategy guided by market algorithms; there are no hunches or assumptions. The computer directs trades.

This managed futures advisor or Mr. CTA has gained 19% this year and is up an average 19.4% per annum since 1999 with no losing years.

Mr. CTA is currently long government bond indices, the dollar and short global stock indexes, the euro, sterling and commodities.

Another group of managers I visited are among the most successful in the conservative multi-manager hedge fund arena. These guys specialize in All-Weather hedge fund investing, mainly in distressed debt, asset backed lending, event driven, merger arbitrage and convertible arbitrage. Since 1994, the group’s flagship product has gained 9% per annum – pretty impressive for a low-risk strategy.

Unfortunately, this All-Weather fund is down more than 15% in 2008 with big losses booked in September, October and November. This marks the first loss for this strategy since its inception 14 years ago.

Still, this multi-manager team is incredibly bullish on distressed debt and bankruptcy reorganization strategies as most of the debt spectrum trades at a big discount to face value in late 2008. Though they believe the markets will continue to trend lower and spreads will continue to widen, we are approaching the best environment for distressed debt since 1991. They believe busted credits, or distressed debt, will double rather quickly once a bottom in this market is formed.

Overall, the consensus among the managers I visited is that we are in a prolonged global economic recession that will extend beyond 2009. Investors should maintain low stock market exposure while keeping cash levels high. We’re not out of the woods yet.