Hedge funds have bled in their short positions through the large part of this year. We reported earlier that hedge funds returned 4.1% on average, according to Goldman Sachs Hedge Fund Trend Montior. GS further points out that less than 5% of hedge funds managed to outperform the +20% return on S&P 500, with 25% of hedge funds reporting absolute losses. So this seems to be another year when hedge funds continue down a road of dwindling returns.

Hedge Funds

Take a look at how global macro funds suffered losses in early August.

Short positions in Herbalife, Radian Group, Zillow punished

The outsized returns on many of the frequently shorted positions have punished bearish bets. The 50 most shorted stocks have returned 20% on average in the year, where 12 out of 50 companies returned three times of the S&P 500 return in Q2 and only 15 out of 50 companies have over depreciated in stock value YTD.

One of the companies that has managed to skyrocket in the first half of 2013 is Herbalife Ltd. (NYSE:HLF), up 118% YTD. The total hedge fund ownership in HLF stock amounts to 30% of the company, whereas the short interest stands at 31%.

Read the latest from Bill Ackman on Herbalife in the Q2 investor letter.

Pitney Bowes Inc. (NYSE:PBI), with 29% of shares held in short positions, has taken in a +68% gain in the year so far. Radian Group Inc (NYSE:RDN), one of the best performing long positions of John Paulson, has a short interest of 27% and is up 128% for the year.

Questcor Pharmaceuticals Inc (NASDAQ:QCOR) is up 150% YTD, while it is one of the most frequently shorted stocks with 25% of the float held in short bets. GameStop Corp. (NYSE:GME) with short interest of 25% has collected a 95% gain in share price through the year.

Other concentrated short bets that have outperformed the stock market by a wide margin are RR Donnelley & Sons Co (NASDAQ:RRD), VistaPrint Limited (NASDAQ:VPRT), Illumina, Inc. (NASDAQ:ILMN) and Zillow Inc (NASDAQ:Z).

Hedge funds successfully short Cliffs Natural, Fusion-io, Equinix

However there are some stocks that have managed to work well for shortsellers, including Cliffs Natural Resources Inc (NYSE:CLF) Inc which is down 37% for the year while it is the second most shorted stock at 36% of float held in short bets. United States Steel Corporation (NYSE:X) is down 20% for the year; the company has short interest of 32%. Fusion-IO, Inc. (NYSE:FIO), Inc is down 53% for the year, Equinix Inc (NASDAQ:EQIX)  is down 20% while Molycorp Inc (NYSE:MCP) is down 33%.

Among the heavily shorted stocks, the companies with the highest hedge fund long ownership are Equinix Inc (NASDAQ:EQIX), with 55% of equity held by hedge funds against  24% short interest; PHH Corporation (NYSE:PHH) with 44% of equity held by hedge funds against  25% short interest; Herbalife Ltd. (NYSE:HLF) with 30% of equity held by hedge funds against  31% short interest; and VIVUS, Inc. (NASDAQ:VVUS) with 30% of equity held by hedge funds against  29% short interest