Hedge-Fund Star Stumbles

Mr. Falcone's fund had about $400 million in prime-brokerage and other assets tied up in Lehman Brothers Holdings Inc. when it filed for bankruptcy protection. While he may eventually get some of the money back, for now his biggest fund, Harbinger Capital Partners, could take a 2.5-percentage-point hit to its September performance from that alone, according to a letter to investors.

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The largest fund run by Kenneth Griffin's Citadel Investment Group, with about $13 billion in assets, is down about 15.5% so far this year through last week, though smaller Citadel funds with a combined $3 billion in assets are up between 20% and 30%.