Health care funds, as well as convertible and merger arbitrage hedge funds, fared the worst.

FORBES: Why Hedge Funds?

Gudefin's hedge fund background helps explain two of her other specialties at Discovery: merger arbitrage and distressed-debt investing.

FORBES: Money & Investing

But he does think there is way too much money in some classes of hedge funds, such as those specializing in merger arbitrage.

FORBES: Borrowed Time?

In merger arbitrage, the narrower the spread between trading price and offer price, the more optimistic traders are that a deal is going through.

FORBES: Yahoo! Deal's Paper Lions

Merger arbitrage is no way to get rich quick.

FORBES: M&A for the Little Guy

Can you do merger arbitrage at home?

FORBES: M&A for the Little Guy