Bear Stearns and Goldman Sachs may feel differently, but it hasn’t been a particularly cruel summer for hedge funds so far – though performance data for August are still only dribbling out. Funds may have suffered to the point where those which have produced double-digit returns for the year to date look like world-beaters, but there has been nothing like the level of outflows that accompanied market wobbles in 1998, 2005 and 2006. Anecdotal evidence from fund consultants suggests that the pain of withdrawals has been mainly concentrated in managed futures, equity long/short and fixed-income arbitrage funds. Investors in other types of fund are asking plenty of questions, chiefly about cash balances, segregation of assets and the quality and range of prime brokers, but they haven’t been taking drastic action.

There are several reasons for this. For one thing, investors’ allocations to hedge funds tend to be spread more widely across a variety of managers these days, cushioning the impact of losses. For another, the influx of institutions such as pension funds and life companies has meant investors, on balance, take a longer view, avoiding knee-jerk reactions. The slow-burning nature of the subprime fallout has also given managers time to mop investors’ brows – while steering expectations downwards.