BOSTON, (Reuters) ? For hedge funds, May has been a miserable month that may mark the end of earning easy money and the beginning of tough trading conditions, managers, investors and industry analysts said.

Nothing has gone smoothly in the $1.2 trillion hedge fund industry since a sell-off in precious metals prices spilled on emerging markets and soon affected developed markets. In the absence of a real catalyst, analysts blame fears of inflation and rising rates for the sudden drop.

Many of the world?s roughly 8,000 funds lost between three and six percent in the first three weeks of May with some having seen swings of ten percent or more, investors and researchers said.

?People have given back a lot of profits and the rest of the year will be much more difficult to trade, with people becoming more sensitive to risk and making fewer bold moves,? said Philippe Bonnefoy, who runs fund of funds Cedar Partners.

Now hedge fund managers, who earned strong returns by simply being long on equities, will have to make savvier stock picks, and any bets on commodities may have to be a little bit quicker with more moves in and out, industry analysts said.

That may be a shock for the legions of managers who earned more money in the first four months of 2006 than all of 2005 simply by jumping on trends that were too good to pass up.

Several hedge fund managers said many in the lightly regulated industry held onto metals bets far longer than they should have and may now face the consequences as this month?s heavy losses could trigger another round of industry closings.

?The weaker players could get knocked out and that would be a good thing, said Aaron Smith, managing director of Superfund Asset Management, which bet gold, copper and silver would climb further. The firm, which invests $1.7 billion, said its flagship Quadriga Superfund Series A fund lost 8.04 percent this month but is still up 4.64 percent for the year.

In the past days of turbulence, copper was the worst hit of the metals after prices had previously doubled this year amid expected demand to fuel foreign building booms and as pension funds piled in.

Hedge funds that had no plans of reinventing themselves as commodity traders were suddenly betting along managed futures players and commodity trading advisers, who use computer models to plot the course, and thought metals would keep rising.

Some players still look for more gains ahead and remain long. For example, Superfund?s analysts said they look for gold to more than double in price during the decade, Smith said, without saying exactly how the fund is positioned.

Losses weren?t confined to metals however and that?s what is making the month so treacherous, investors said. Global macro funds that bet on currencies, commodities and interest rates are said to have given up roughly 25 percent. Funds specialising in emerging markets and even mid-cap stocks were said to have given back as much as 50 percent, investors said. For example, Moore Capital Management ? an investor in Bermuda-based Max Re ? is said to have lost 2.7 percent in the month to May 17, which pared the year?s gains to 5.1 percent, a person who saw the hedge fund?s numbers said.

?Meltdown May? is now a catch-phrase with weary traders and managers, who recall last year?s turbulence in the convertible arbitrage market, but say this year?s troubles are far worse.

?In 2005, it was contained to one trading strategy. In 2006, it is much more broadly based,? said Sol Waksman, president of the Barclay Group, which invests in hedge funds and tracks returns.

?If you were out there, you probably got hit.?