BlueMountain Up Over 10%

Jul 26 2012 | 11:54am ET

BlueMountain Capital Management's flagship credit hedge fund capped off a banner first half with a strong June.

The $4.5 billion Credit Alternatives Fund returned 1.43% last month to finish the first six months of 2012 up 10.17%, The Wall Street Journal reports.  The average hedge fund is up less than 2% on the year, industry indices show.

A substantial chunk of the hedge fund's gains can be attributed to its bets against JPMorgan Chase's disastrous credit default swap index trades. Those positions could cost the bank as much as $9 billion, but they may have enriched BlueMountain by as much as $300 million.

BlueMountain is now reportedly helping JPMorgan unwind its trades, quietly buying default protection to cover them and then selling it to the bank. The hedge fund was founded by a JPMorgan veteran, Andrew Feldstein.

BlueMountain didn't tout its JPMorgan winnings in its letter, instead attributing its June gains to "off-the-run index arbitrage." It also said it had cut its short bets against financials and added exposure to European sovereign debt.

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