PEOPLE who run hedge funds hate the way the press describe them as “secretive”. A quick Google of “hedge funds” shows what a cliche it has become. Hedge funds are “notoriously secretive” and “super-secretive”; they live in a “secretive world”.

But sadly, for an increasing number of them, the secret is finally out.

The promise behind this $2 trillion universe was that its managers would make money whether markets went up or down. But the turmoil in the financial world is proving too much for many of them. All of a sudden the Masters of the Universe are failing fast.

The average hedge fund has lost more than 4% this year, according to Hedge Fund Research, putting the industry on course for its worst year on record. New investments in hedge funds for the first six months of 2008 fell below $30 billion, compared to $118 billion for the same period last year.

The hedge fund manager has become the Gatsby figure of our era. But his fall will be felt by more than Manhattan estate agents, art galleries and Porsche dealers. Over the past decade, the hedge fund industry has grown fivefold, pumped up with billions from corporate and public pension funds and university endowments looking for market-beating returns.

Hedge funds have blown up in the past, and small ones fail every year. Now fund after fund is warning investors that their future returns may be difficult to predict.

About 200 funds have collapsed this year. Of those left, 61% of the 2,795 managing more than $100m and tracked by hedge fund news website HedgeFund.net’s database, are losing money.

Just like the venture capital firms before them, hedge funds are finding the easy money that once fuelled them is gone. Borrowing is now significantly more expensive and banks, with troubles of their own, are wary of making long-term commitments.

The industry that emerges from this downturn looks sure to be significantly smaller than the one that went in. These collapses may well attract government scrutiny, given the amount of pension money invested in these unregulated firms.

A recent study by Glocap, a headhunting firm, found that those who had worked at hedge funds for two to four years were expected to receive a 16% drop in bonuses this year while those with a few more years of experience are likely to suffer by 19%. But those figures are still $174,583 and $393,333 respectively.

And if you are lucky enough to be working for one of the blue-chip hedge funds, things do not look so bad at all. Star funds, including SAC Capital and Citadel Investments, have been on a recruitment drive amid the financial fallout from closing funds.

It has been a long time coming, but now we are finally seeing who these secretive hedge fund managers are.

And the truth is that some of them were not hedge fund managers at all.

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