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Hedge funds suffer in May

May has kept up its unwelcome tradition of being a "meltdown" month for the hedge fund industry, analysts have confirmed.

Inflation and rising rates have been suggested as the guiding factors behind a significant slump in the $1.2 trillion industry, and a large number of the world's 8,000 hedge funds saw damaging downturns in the first three weeks of the month.

Many saw losses of between three per cent and six per cent during this time – and ten per cent swings are said to have been reported in some quarters.

Philippe Bonnefoy of the Cedar Partners fund told Reuters: "People have given back a lot of profits and the rest of the year will be much more difficult to trade, with people becoming more sensitive to risk and making fewer bold moves."

Some experts believe that the current state of the industry will see new hedge fund managers needing to act smarter than before, with a tactic of simply being long on equities no longer being enough.

This means that industry players may need to jump more swiftly in and out of moves concerning certain commodities, with those who hold onto certain bets for too long likely to count the cost.