The fund and it's investors may lose a lot. The people running the fund will not. But it's important to remember that it's a matter of scale here. Billions is a lot to a midwestern retail worker who put half his rent check into a volatile stock. It's not a lot to large groups of already-wealthy investors who have a portion of their portfolio invested with this one fund.
It's not their money, it's the money from LPs who invested in the fund.
If you know the term LPs you should know the typically senior management at hedge funds have a significant portion of their net worth invested in their own funds.