The rumors served up by Marketwatch were correct. Yup, the hedges are definitely being trimmed. The Sunday Times:

A RAFT of European hedge funds have been forced to introduce emergency measures to protect their businesses from collapsing in the wake of the turmoil in financial markets. Up to 10 European hedge funds have suspended redemptions after investors clamoured for their cash when the managers made severe losses.

A London prime broker told The Sunday Times that even before last week’s extreme gyrations, nearly two-thirds of London-based hedge funds had lost between 4% and 10% of their value. A “significant number” had lost much more, he said.

The manager of one of Britain’s biggest hedge funds said: “It’s been an extraordinary week. Even in the crash of 1987 I don’t remember so much carnage.”

Experts warned that the problems among hedge funds were likely to cause more disruption in the markets, especially if many are forced to liquidate positions.

Funds with heavy losses reportedly include Corin, Phylon, Addax FX1, Henderson Global Currency, Odey Treasury, Sector ERV, Kinetic Special Situations, Systeia Alternative Risk Trading and Polar Technology, according to Eurohedge, which monitors the industry.

The problems have been exacerbated by the fact that prime brokers, the arms of investment banks that finance hedge funds, have tightened lending policies.

One manager said: “Since market losses are magnified by leverage in a hedge fund, there can be a sudden need for a cash injection. But this time, the banks can’t lend as easily. Funds are then forced to sell, which causes even more problems.”

Hedge funds said that for many the problems started last year with a difficult May followed by worse problems in November and December.