What a difference a year makes for private equity firms.

While 2007 was marked by the IPOs of PE giants Fortress and Blackstone, 2008 will go down as the year economic devastation shut off industry funding.

U.S. private equity firms raised $43 billion in fourth-quarter 2008 funding compared with about $100 billion for the same period a year ago, a 60 percent decline, according to a report from Dow Jones Private Equity Analyst.

"The drop in fund-raising we saw in the fourth quarter marked a dramatic reversal from the first three quarters of the year, when private equity firms had been running slightly ahead of 2007's fund record pace," said Jennifer Rossa, managing editor of Dow Jones Private Equity Analyst.

For full-year 2008, the report said 363 U.S. PE firms raised $265.6 billion, an 18 percent decline from the $325.8 billion raised by 506 funds in 2007.

The Dow Jones report said that declines could continue in the coming months as some firms consider cutting fund sizes and limited partners—likely lacking good returns—will have little money to re-up investments.

The economic crisis that began with the Lehman Brothers bankruptcy has left few areas of private equity unscathed, the report said. Buyout shops have logged a 26 percent decline in fundraising, down to $181 billion from 143 funds for 2008 compared with $244.6 billion from 222 funds in 2007.

Venture capital fundraising also declined in the fourth quarter. VC firm pulled in $24.7 billion from 150 funds in 2008, the lowest since 2004 and a 25 percent drop from the $33.1 billion from 182 funds in 2007.