Hedge funds are struggling with the Greek debt crisis in 2011, according to industries sources who spoke to NYTimes.

Hedge funds that were long European financial stocks have been hurt by fears that a Greek default would hurt the companies' Greek debt holdings.  A worse scenario is that it would spread to the bonds of other European countries.

The euro currency, meanwhile, has declined since early June but performed well last week because the Greek government passed a tough austerity, thereby securing financing from Europe and staving off default.

However, sources told NYTimes that no hedge fund managers they know of got it right big time and cashed in.

The fund managers were likely deterred by the heightened levels of uncertainty. 

The hedge fund industry, in general, is being sidelined because we know things will be tougher, we're just not sure where it's going to come from... The problems could come from stocks, could be bonds, could be banks, could be the illiquidity of the market or a change in the short-selling rules, said Philippe Jabre, a famous London fund manager.

Jabre's last fear is one of the reasons hedge funds were hesitant to go on the short side.

The problem with being short the European banks is that politicians will do everything they can to save them.  You're fighting against people who can change the rules of the game in the middle of the game, said Pedro de Noronha , another fund manager.

The ideal environment for the best hedge fund managers is a trending market one way or another.  For example, the internet bubble in the 1990s made many fund managers look like geniuses.  So, too, did the big swings in the 1970s for multiple markets.

However, a sideways market, or one that you can't short or long, is tough.

Of course, the play in this situation is selling options/protection on the upside and downside. 

But who wants to do that in an environment rife with uncertainties and ruled by politicians who can change the rules of the game in the middle of the game?