Plexus Partner’s flagship hedge fund is down more than 35% this year, burned by wrong-way fixed-income arbitrage bets.

The London-based firm was hurt by the so-called “basis trade” between corporate credits and their derivatives, the Financial Times reports.

The US$1.4 billion fund’s trades went wrong in the face of unexpected moves in the credit market, possibly driven by other hedge funds dumping their positions.

The firm has reportedly sold off hundreds of millions of dollars in convertible bonds in an effort to stave off skittish banks calling in its loans.