Bloomberg – Hedge funds run by Jeffrey Gendell and John Burbank III posted their worst monthly losses in October. Peter Thiel gave back gains made earlier in the year. Nobel-prize winner Myron Scholes froze his biggest fund.

The managers, like many in the $1.7 trillion hedge-fund industry, were caught in a downdraft of market declines, client redemptions, demands from lenders for more collateral and forced asset sales that accelerated after Lehman Brothers Holdings Inc. collapsed in mid-September.

Funds fell by an average 5.4 percent last month, pushing the year-to-date drop to 15.5 percent, according to the HFRI Fund Weighted Composite Index compiled by Chicago-based Hedge Fund Research Inc. Investors have been handed losses for five straight months, the longest streak since HFRI started the index in 1990.

“October was the perfect storm for liquidity drying up, especially in the credit markets,” said Gary Vaughan-Smith, co- founder of London-based SilverStreet Capital LLP, which has $600 million invested in hedge funds for its clients. “We are through the worst and the turmoil should be gone by the end of November.”

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Reuters- More merger and acquisition activity among fund firms is likely as the industry faces up to a tough 2008, said Mark McCombe, head of HSBC’s asset management arm, which is to rebrand next month.

McCombe, chief executive of what will be known as HSBC Global Asset Management and include the firm’s hedge fund, quantitative, liquidity and multi-manager arms, said the funds industry had had a tough time over the past year and faced further difficulties this year.

"You had this almost perfect storm situation, where liquidity dried up, dislocation, added to which you then built in volatility … I think you can say this year will be a difficult year for all asset managers and for differing reasons," he said in a recent interview.

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