On Monday, as the deteriorating situation in Greece dominated the headlines and roiled markets, some of the world's most prominent hedge funds experienced their largest "drawdown" since August 2007, according to Barclays analyst Keith Parker.
A drawdown is a measure of the change in the value of a hedge fund's portfolio from a recent peak to a subsequent low. You can see this week's peak-to-trough move in the chart below, which shows the biggest daily drawdowns in the HFRX index since 2004.
The HFRX index tracks the performance of macro hedge funds, which make their money by betting on the moves of the global economy, and commodity trading advisers (CTAs) which mostly use computer-driven, trend-following strategies to invest.
Why the big move on Monday? As Parker puts it, it seems a lot of these hedge funds have long positions in peripheral euro zone bonds. Greek government bond yields jumped sharply on Monday, as markets digested the news of a surprise referendum.
The below shows the correlation between the one-month return of macro hedge funds and various asset classes. You can see hedge fund returns are moving more in tandem with Italian government bonds than they are with the euro or oil, for instance.
It's worth noting here that CTAs in particular have been accused of exacerbating large market swings in recent weeks, including the big selloff in German government bonds in May.
As Parker says in his note:
We worry that further de-risking by macro/CTA funds could weigh on markets as risks remain.