It looks like a number of hedge funds who were doing well betting against the banks and betting with commodities are finally starting to get their comeuppance as the easy money shorting the banks is decreasing, and commodities have begun to correct, at least short-term over the last month.
As a result, hedge funds as a whole are on pace to turn in their worst monthly performance since July 2002, down 2.8% for the month, based on data from the group Hedge Fund Research that looked at the returns from 60 hedge funds. Some managers are now down more than 20% for the year.
When corrections occur on short notice, even for those funds that are actually hedged somewhat (not all hedge funds are), you simply don't have enough time to adjust delta, especially for the larger funds, resulting in stories like the recent one in the WSJ. As they say, live by the sword, die by the sword.