Funds lost money last month as the S&P 500 sank 1.85 percent. Still, the broad gauge of market performance has risen over 14 percent this year, while hedge funds have gained only 4.3 percent on average, according to Cambridge, Massachusetts-based Hedge Fund Research.

Positive performance among hedge fund managers that use Relative Value Arbitrage, Equity Hedge and Event Driven strategies did not offset the losses suffered by macro-focused hedge funds, HFR data showed.

Fixed Income Asset Backed hedge funds remain the best performers in 2012, HFR said, rising 14.4 percent for the year through Oct. 31.

Managers focused on stocks also managed to add to their gains last month, even as the broader stock market sold off. Equity hedge funds rose 0.2 percent in October, "with gains across long, short and market neutral exposures," HFR said. Those managers have returned almost 5.7 percent this year.

But macro-focused managers lost 2.2 percent last month and are now down about 1.3 percent for the year.

"Hedge fund performance in October reflected a definitive shift in investor sentiment from the beta-driven optimism over steady improvements in stagnant global economies to the realities, risk and uncertainly inherent in additional European banking stabilization measures, U.S. elections and the pending fiscal cliff," stated Kenneth Heinz, president of HFR.

While hedge funds, in general, battled to make gains in October, some continued to record solid performance in the month.

Jason Mudrick's Mudrick Distressed Opportunity Fund, one of the year's best performers, inched up 0.7 percent in October and is up 18.8 percent for the year.

Mark Carhart, who used to run Goldman Sachs' Global Alpha Fund, told clients that his Kepos Alpha Fund gained 2.9 percent in October and is up 15.5 percent net of fees this year.

For some investors, like John Paulson, the month was another month of mixed returns.

Paulson & Co's Advantage Plus fund, a portfolio that slumped more than 50 percent last year, lost 3 percent and is now down 17 percent in 2012. But Paulson Enhanced, a fund that aims to make money on companies involved in mergers, climbed 1.46 percent in October and is now up 10.8 percent, the best performer in the billionaire investor's lineup.

His gold fund, which scored huge gains only a few years ago, tumbled 6.8 percent and is now off 10 percent for the year. But his Credit fund rose 3.83 percent in October and is up 6 percent for the year.

Oct. 31 marked the redemption date for many of Paulson's funds, but a source familiar with the requests said they were roughly in line with historical averages, suggesting that investors had not rushed to pull money out despite some disappointing returns.