August 10, 2007 (LPAC)--The ongoing turmoil in the markets, a reflection of the disintegration of the global financial system, is leading to significant losses in those "quantitative" hedge funds that use "market-neutral" strategies, via computer trading, according to the Wall Street Journal and Citigroup. Some of these funds were asked by banks to put up more collateral to back loans, so they sold some of their holdings to raise cash, and closed out "short" trades that bet against companies.

"Nothing seems to be working," wrote a London-based Citigroup analyst. "Previously uncorrelated factors have recently been falling with the same pace, leaving investors with very few places to hide."

Aside from Goldman Sachs' two hedge funds in severe trouble, these include: The Renaissance International Equities Fund, one of the world's largest, a $26 billion-plus hedge fund run by billionaire James Simons, said it has "not had good luck during these last few days," down 8.7% so far in August. "We have been caught in what appears to be a large wave of de-leveraging on the part of quantitative long-short hedge funds," Simons wrote in a note to investors yesterday. It lost from 4-4.5% in July. AQR Capital Management, a $38-billion fund based in Greenwich, Conn., suffered losses in recent days on market-neural investments. Tykhe Capital, a small New York-based hedge-fund firm that manages about $1.8 billion, reportedly lost about 20% in its largest hedge fund so far this month, and is moving to trim positions. German's largest mutual fund firm, Deutsche Bank's DWS said it ABS Fund lost 30% if its value since July, as customers have withdrawn their money.