The steep decline in oil prices is seen as an opportunity by many hedge funds. But picking out the bonds of distressed oil companies can also be a dangerous game.
Take Kamunting Street Capital Management, which is essentially going out of business following losses on high-yield or "junk" energy company bonds. The fund lost about 4 percent last year and was down an additional 2 percent this year, according to The Wall Street Journal. The exact percentage of losses related to the decline in oil and gas prices was unclear.
The Greenwich, Connecticut-based hedge fund firm is returning remaining capital to clients and will become a so-called family office to manage the investments of founder Allan Teh, according to the report and regulatory disclosures.
Also known as "K Street," Teh's funds invested in bonds from around the world with a focus on the U.S. The firm was founded by Citigroup veteran Teh in 2004 and managed $663 million as of Nov. 30, according to private investor materials obtained by CNBC.com. The fund employed 1.8 times leverage using borrowed money as of that date.
Representatives at Kamunting Street did not respond to requests for comment.
Other hedge funds have been hit by the decline in energy prices.
The average commodity focused hedge fund fell about 1 percent in 2014 and is down roughly the same amount in 2015 through March, according to data compiled by eVestment.
Avenue Capital Group's Avenue International fund, for example, was down 3.87 percent year to date through March 20, largely reflecting declines in the value of the fund's energy-related positions, according to a person familiar with the situation.
The exact securities were unclear, but $13 billion Avenue, led by Marc Lasry, focuses on the bonds and stocks of companies in distress. A spokesman declined to comment.
Another appears to be the Armajaro Commodities Fund, which is down about 6.5 percent in 2015 through the end of March, according to a person with knowledge of the returns. The fund trades across the commodity markets, including energy, metals and food-related commodities. A spokesman didn't immediately respond to a request for comment.
As much as oil has caused pain, others see opportunity.
As CNBC.com recently noted, Lansdowne Partners, Avenue, Carlson Capital and Blackstone Group's GSO Capital unit are among the firms raising fresh capital to deploy in either long-short energy stock picking, credit investing, or both.
Investors have added about $49 million in net cash to commodities hedge funds so far this year, according to eVestment. That comes after they pulled more than $3 billion in 2014. So-called distressed funds, which can trade energy-related stocks and bonds, took in $9.15 billion from investors in 2014, but have lost $20 million in net assets so far this year, according to eVestment.
"A lot of people are looking at energy, for sure," said a hedge fund investor who asked to remain anonymous because of firm media policy. "But I haven't seen anyone make money on it yet."
Read MoreHedge fund machines cash in—again