Axial Capital Management, seeded by hedge fund legend Julian Robertson of Tiger Management, is liquidating after suffering losses from shorting stocks over the past few years, two people familiar with the situation tell CNBC.

The main Axial Capital fund produced a negative return of 15.4 percent net of fees in the first nine months of the year, according to investor information obtained by the news service.

The fund had a 38.6 percent net-short position for stocks as of Sept. 30.

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The Standard & Poor's 500 Index has risen 26.2 percent so far this year.

"The equity market rally, driven in part by multiple expansion, over the last few years has been a very difficult environment for funds operating with a dedicated short bias," Peter Laurelli, head of research for market data firm eVestment, tell CNBC.

The firm's assets, which totaled as much as $1.8 billion in November 2010, dwindled to $605 million as of Sept. 30.

Robertson appears to hold no grudge against Axial Capital co-founders Marc Andersen and Eliav Assouline.

"These are terrific guys and I wish them the very best in the future," he said in a statement to CNBC.

The hedge fund industry in general continues to trail broad market indices. For example, the HFRI Fund Weighted Composite Index of hedge funds gained only 5.5 percent in the first nine months of the year, compared with 19.8 percent for the S&P 500, according to Barron's.

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