https://www.zerohedge.com/news/2018-11-09/hedge-funds-brace-november-15-bloodbath
ex
A few weeks ago, we reported that even when the market was hitting all time highs ahead of the historic October bloodbath, hedge fund investors were growing increasingly nervous, and rushed to redeem $15 billion from the space in September, the largest single monthly outflow in years, bringing year-to-date net flows to flat after being stubbornly in the green for much of the year despite what has been another deplorable year for hedge funds.
This was not the first time either: over the last three years, investors had removed over $100 billion from the industry, but performance gains had offset these losses… at least until last month.
And then October came which was not only a "bloodbath across almost every strategy", but was the worst month for hedge funds in 7 years.
_
This is where leverage and under-performance eats away at the under-pinnings of the system. All these funds are positioned for 'up' that is all. They are as levered as the big banks-who have upwards of 60x they play with.
The daily market moves in % terms have been benign. When you add in the leverage and the cost of carrying that leverage it starts to eat everything and everyone.
This will have a knock-on effect as the world is tightly connected due to the co-mingling or hypothecations that exist across all asset class.
In other words…everyone tries to claim the same set of assets at the same time. Chairs removed etc. Not pretty when it happens.