Hedge funds as a group are not having a good year. Hedge Fund Research's HFRX Global Hedge Fund Index was down .97% through May 30. It likely has not gotten better as the market has fallen since. The recent Chinese frauds have hit a large number of high profile hedge funds hard. The FT reported that John Paulson is down 13% in his flagship fund year to date. The risk is that we see a repeat of last Summer where the buzzword among hedge funds becomes "risk off".
Hedge funds have very little tolerance for pain these days. Most have "risk management" systems in place where they very quickly reduce risk when they start losing money. Last Summer it became a self fulfilling cycle as hedge funds sold, sending risk assets lower forcing other hedge funds to sell as well.
The good news is that hedge funds have been seeing heavy inflows this year. This additional cash likely lessens the need for selling. However, hedge funds as a group are more likely to be a drag on the market for the remainder of the Summer.