Peter Cohan had it right several months ago when he explained the situation in Goldman Sachs (NYSE: GS) Global Alpha hedge fund. In fact, Financial News is reporting that Global Alpha lost 7.7% before fees in the last week of July.

This certainly isn't the only poor performance in the hedge fund space recently. Peter Cohan has covered the situation inside Harvard spinout Sowood Capital and I've covered the Bear Stearns (NYSE: BSC) hedge fund situation in-depth.

All of these stories of poor performance from prestigious hedge funds point to one clear thesis: the markets are becoming increasingly harder to profit from due to a variety of factors. Most importantly, the proliferation of alternative investment strategies and hedge funds have made the markets increasingly more efficient. Value discrepancies are more quickly extrapolated, thus forcing investors to look at smaller companies and more eclectic securities. The growth in derivatives has forced events that would have clear causes and effects to become much more complex. While the recent volatility in the markets is probably helping many hedge funds to prosper, it's also killing funds which are short volatility via short options positions -- a trade that has worked during the last several years. Add it all up and you have a very tough environment to make money as a fund manager.

However, it's also important to remember that just because these hedge funds are performing poorly, by no means is every hedge fund performing poorly. In fact, there are two sides to every trade -- for every fund that blew up from excess subprime exposure, I'd be willing to bet another fund prospered from the implosion with short bets. For every fund who is short options in this newly volatile market, another fund is overweight options and prospering.

That's why they call it a zero-sum game.