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The May selloff in stocks couldn't have come at a worse time for hedge fund manager Victor Niederhoffer, who's been working hard to put his infamous 1990s boom-to-bust story behind him.

In May, Niederhoffer's four-year-old

Matador Fund

posted one of its worst months ever, industry sources say. The fund, which specializes in trading stock futures and stock index futures, lost nearly 29% as the U.S. markets began to unravel, reducing the value of Matador's holdings to about $247 million.

As of the end of May, the so-called commodity trading adviser fund, which was once up 31% for the year, was 6% in the red since the end of December. Results for June, which is shaping up as another harsh month for investors, could not be determined.

Niederhoffer, in an email response to

, confirmed Matador's big percentage loss in May, but noted the fund has registered gains in 29 of the past 32 months.

"As of May, we were close to even for the year,'' says Niederhoffer. "Considering everything, after three years where ... we were at or close to the top-performing CTA, I consider that well above what one might have hoped for.''

Niederhoffer's horrendous month comes as some on Wall Street are proclaiming the 62-year-old trader, who lost it all in the October 1997 market meltdown, back at the top of his game. Matador was up 56% last year and the fund's outsized performance in 2005 recently earned Niederhoffer a hedge fund industry award and a favorable profile in

Bloomberg Markets

, the news service's glossy magazine.

On April 6, MARHedge, a hedge fund industry trade group, named Matador the top-performing CTA for its past performance. The group, during a ceremony at New York's swank St. Regis Hotel, noted that Matador not only posted a 56% gain in 2005, but that the fund has managed an average annual return of 41% since its inception.

At the awards dinner, Niederhoffer, who is also a writer, told his hedge fund peers that he appreciated "the difficulty and the courage it took to give me an award, since I once went under,'' according to the


article, which was published before Matador's May returns came to light.

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To be fair, May was a brutal month for stocks, with the

S&P 500

falling 3%. Hedge funds, which had been enjoying a banner year up until May, were not immune from the carnage. Barclay Trading Group, a hedge fund tracking firm, estimates that 70% of hedge funds lost money in May, with the average fund dropping 3%.

Barclay notes there were a number of funds that lost more than 20%. Clearly, Niederhoffer isn't the only manager seeing red on his trading screen these days.

Still, Niederhoffer's bad month is an illustration of the high-risk trading strategy that the Connecticut-based hedge fund manager is famous for. Matador's tumble in May also reveals how easy it is for the tables to turn on a hot manager, especially when he's making big bets with borrowed money.

Matador has a history of volatile trading months. Early in its life, the fund, which is open only to offshore investors, lost 30% in July 2002, according to



It was Niederhoffer's appetite for risk that led to his undoing in 1997 and the collapse of his former $130 million fund, which imploded when the

Dow Jones Industrial Average

plunged 554 points on Oct. 27, 1997. The selloff was sparked by a worldwide panic over an Asian currency crisis.

The fund, which heavily relied on margin to make its bets, got caught on the wrong side of those trades and couldn't get out of those positions fast enough. The fund collapsed when Niederhoffer couldn't come up with the money to pay down the margin calls from his broker.

The broker was



, the once-giant commodities and derivatives firm that collapsed last October in an accounting scandal, allegedly engineered by former Refco CEO Phillip Bennett. Refco filed for bankruptcy shortly after it revealed that Bennett had been hiding hundreds of millions of dollars in old customer trading losses in a separate. Bennett allegedly hid the uncollectible debt in order to burnish Refco's books in advance of its August 2005 IPO.

and other news organizations reported last fall that some of the trading losses Bennett was hiding may have included debts that Refco couldn't collect from Niederhoffer's fund. But Niederhoffer has denied the allegation, saying his firm and Refco resolved all their claims a long time ago.

Before the 1997 market plunge, Niederhoffer was considered one of Wall Street's top hedge fund managers -- at least to himself. In 1996, he published an autobiography,

The Education of a Speculator

, in which talked about his success as a rough-and-tumble trader with much bravado.

Niederhoffer clearly hasn't lost his swagger. Despite Matador's lousy May performance, the hedge fund manager says he's not about to change his investing style. He says there's only one way to make money on Wall Street: taking risks.

"Regrettably, I don't know how to make money without risk,'' says Niederhoffer in his email response. "If I ever do learn, my customers and I presumably will be much wealthier. I don't expect to learn.''