Hedge fund positions are an important component of crowded trades. These vehicles are particularly active, take highly concentrated positions, and utilize leverage and short sales. Using a database of hedge fund holdings, we measure the degree of security-level crowdedness. The difference between the average returns on portfolios sorted by high versus low crowdedness portfolios is sizable, and the variation in the realized portfolio returns is distinct from other traditional risk factors. Further, hedge fund exposures to crowdedness are often significant, and they help to explain downside “tail risk,” as funds with higher exposures experience relatively larger drawdowns during periods of industry distress.