Reuters - European shares slid lower on Friday as tensions in Ukraine before a weekend referendum in the country's Crimea region sent a pan-European equity index down to its lowest level in more than a month.

The uncertainty over Crimea, after Russia effectively occupied the region following the ousting in Kiev of former pro-Moscow Ukrainian President Viktor Yanukovich, also caused a spike in volatility in equity markets.

The pan-European FTSEurofirst 300 index, which rose 16 percent in 2013, closed down by 0.7 percent at 1,284.32 points - marking its lowest level since early February. The index also fell 3.2 percent over the week - marking its worst weekly loss since late January.

The euro zone's blue-chip Euro STOXX 50 index also fell 0.5 percent to 3,004.64 points while the Euro STOXX 50 Volatility Index - a gauge of investors' fears - surged 5.1 percent to its highest level since early February.

"Europe relies on Ukraine for a lot of its gas, so if there are problems in Ukraine, it will have an impact on Europe's fragile economic growth," said Caroline Vincent, European equities fund manager at Cavendish Asset Management.

GOOD CONDITIONS FOR HEDGE FUNDS

Global equity markets have retreated from multi-year highs since the Crimea crisis started in late February, which has led many investors to trim back on equity holdings in order to cash in on a stock market rise that occurred in early February.

Vincent said she had cut back on Russian stocks, which have slumped due to the tensions in Crimea, but had otherwise kept positions unchanged on western European equities.

However, Jeanne Asseraf-Bitton, head of global cross-asset research at Lyxor Asset Management, said hedge funds with "short" bets predicting further market declines had performed well in light of the problems in Ukraine and Russia.

Aurel BGC chartist Gerard Sagnier said European stock markets could fall by another 5 percent, although he added that such a retreat could represent a good buying opportunity, given expectations that European equities should recover later in 2014 as the region's economic pick-up gradually continues.

John Surplice, European equities fund manager at Invesco Asset Management, also said European stock markets looked well-placed on a longer-term view over the whole of 2014.

"In terms of risk-adjusted returns, it still looks OK. We're not facing a break-up of the euro zone and we're no longer in a recession," said Surplice.