According to investors speaking to the Financial Times, the first week of May was a disaster for many hedge funds, with some losing enough to wipe out any gains made in the first quarter of 2010.
UK-based fund BlueTrend dropped 7.57 per cent in the opening days of the month, while AHL fell 3.3 per cent.
Viking Global Investors saw its global equities fund reduced by 3.77 per cent, with Renaissance Institutional Equities Fund dropping 3.6 per cent.
Earlier this week, Michel Barnier, European Union (EU) commissioner for internal markets and services, pledges to ensure there will be "equal treatment" for overseas hedge funds operating in Europe.
Part of controversial proposals for hedge fund regulation in the region include the introduction of a "passport" system, which only allows hedge funds to operate in Europe if they convene to EU rules.
By Asim Shah