: "BOSTON, May 29 (Reuters) - For hedge funds, May has been a miserable month that may mark the end of earning easy money and the beginning of tough trading conditions, managers, investors and industry analysts said.
Nothing has gone smoothly in the $1.2 trillion hedge fund industry since a sell-off in precious metals prices spilled on emerging markets and soon affected developed markets. In the absence of a real catalyst, analysts blame fears of inflation and rising rates for the sudden drop.
Many of the world's roughly 8,000 funds lost between 3 and 6 percent in the first three weeks of May with some having seen swings of 10 percent or more, investors and researchers said.
'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,' said Philippe Bonnefoy, who runs fund of funds Cedar Partners.
Now hedge fund managers, who earned strong returns by simply being long on equities, will have to make savvier stock picks, and any bets on commodities may have to be a little bit quicker with more moves in and out, industry analysts said.
That may be a shock for the legions of managers who earned more money in the first four months of 2006 than all of 2005 simply by jumping on trends that were too good to pass up.
Several hedge fund managers said many in the lightly regulated industry held onto metals bets far longer than they should have and may now face the consequences as this month's heavy losses could trigger another round of industry closings.
'The weaker players could get knocked out and that would be a good thing, said Aaron Smith, managing director of Superfund Asset Management, wh"
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