The Treasury Department's Office of Financial Research has released a working paper analyzing the hedge fund industry. According to the authors, the hedge fund industry has become an increasingly important part of the financial markets in the last two decades. Their findings show that co-movement in hedge fund returns is not restricted to times of extreme financial turmoil. The authors examine two phenomena they believe influence the hedge fund industry--contagion and time variation in risk-adjusted return. They find that both flight to safety and large funding liquidity shocks play important roles in explaining the abrupt shift of the common factor to the crash state.