With hedge funds down 10.8%, two big winners up 58%, 24.6%

Hedge funds have had a lousy year, losing an average of 10.8%. But two hedge funds -- big winners in 2007 -- kept making money this year as well. Meanwhile, those two winners mask an awful lot of losers who will probably find their way into oblivion.

The winners for 2008 (at least through September) are run by James Simons (a math genius whose money-making techniques elude explanation) and John Paulson (who made so much money last year shorting subprime). Here are the details:

• Medallion Fund, run by Simons' Renaissance Technologies LLC, has $8 billion in assets and gained more than 58% -- or $1.43 billion in profits; and
• Advantage Plus fund, Paulson's $13 billion investor in takeovers, restructurings and other corporate events, returned 24.6% through September.

Meanwhile, investors are scrambling for the exit for the typical hedge fund, withdrawing $87.5 billion. Total industry assets fell 11% from the peak of $1.93 trillion in the second quarter of 2008 to $1.72 trillion at the end of the third. Hedge fund closures by the middle of 2008 were 15% ahead of 2007. And that may be only the beginning for the world's 10,000 funds.

Isn't capitalism great?

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.