Hedge funds are having one of their worst years ever, with negative returns dominating the investor letters landing at clients’ homes.

A record meltdown of some $100 million was yanked from the once high-flying funds, pummeled by the largest decline in assets under management since the financial crisis of 2008.

The problematic US economy has toppled the “smart money” caught on the wrong side of big bets on most everything from oil to interest rates.

And additional losses and redemptions may soon pile up at hedgies’ offices judging from October’s returns — cutting further into the $2.87 trillion in assets under management for the industry.

Large hedge funds such as Bain Capital and Fortress Investment Group are in the process of shutting down multi-billion funds due to poor performance.

Despite protestations from the industry, analysts are sounding more alarm bells.

“I am not saying these hedge fund managers aren’t smart, but that doesn’t mean you are going to get the market right every time,” said Sol Waksman, founder and president of BarclayHedge, which last week reported the average hedge fund lost 1.43 percent in September, the fourth straight monthly decline, according to the Barclay Hedge Fund Index.

The index has dropped 1.21 percent year to date. The average hedge fund is down 1.5 percent as of Sept. 30, according to Hedge Fund Research data. The Standard & Poor’s 500, by comparison, declined by a bit more than 1 percent.

One former hedge fund pro took a look at the numbers and rolled his eyes.

“I learned [from] being responsible for wealthy people’s money that just because you have dollars doesn’t mean you have sense,” said Steve Sjuggerud, chief strategist at Stansberry Research. “People, even on Wall Street, are often heavily driven by emotion.”

That latest emotion ended in tears.

Since July 1, one hedge fund after another started posting declines and investors, gripped with fear and driven by greed, started pulling their money from the funds.

A bit of unrest is spreading through hedge fund land — some funds are closing and some holiday parties, well, they might be pared back.

“Investor uncertainty, fueled by weak growth numbers in the US and China, along with the Fed’s reluctance to raise US interest rates, triggered a global selloff in equities, commodities and high-yield bonds,” according to Waksman.

While the industry puts on a brave face, citing a more stable market in recent weeks compared with a summer punctuated by the Greece crisis and China’s swoon, there’s lingering fear.

“Look at earnings — they’re very dismal seven years into this business cycle and after the credit contraction we had in 2008 and 2009,” said commodities expert Anthem Blanchard, chief executive of Anthem Vault.

“I wonder what happens if monetary policy isn’t accommodative enough in the next wave of defaults — that’s a pretty scary prospect.”

Back from an investor conference in Las Vegas attended by VIPs, including one-time Republican presidential hopeful Ron Paul, Sjuggerud told The Post, “The consensus was unanimously bearish.”

Then there’s the Middle East. In a sobering note last week, John Browne, senior economic consultant for Euro Pacific Capital, raised an alarm in the Middle East. Shifting regional alliances, with Vladimir Putin cozying up to Saudi Arabia — a once implausible thought — could set the stage for a coordinated rise in oil prices by these restive producers.

Under this scenario, the recent decimation at hedge funds might only be a dress rehearsal.

Rising fuel prices could trigger inflation, giving the Fed cover to directly or indirectly “normalize” interest rates, with the prospect of rising rates unleashing hell, according to Browne’s thinking.