Hedge funds feel the pain, particularly in energy

Oil slump: Hitting the hedges

There is a lot of pain in hedge-fund land. Imagine how these guys feel. First, they have underperformed all year because most funds run a book of long stocks versus a book of short stocks. Because shorts have underperformed most of the year, they have underperformed the market. Again.

Now, they are getting killed because of how they are positioned: 1) long U.S. market, and 2) long growth stocks.

Growth has gotten hit hard: Semis (XSD) down 15 percent this month, Internet (FDN) and Biotech (IBB) down 7 percent.

But a particularly painful example is energy. The Street has been heavily involved in exploration and production stocks, particularly smaller-cap shale plays, which have been dramatically growing earnings.