BlueMountain Bounces Back Alongside CDS

Jun 3 2009 | 4:22am ET

Credit hedge fund shop BlueMountain Capital Management is in the money once again as the credit-default swaps market has come back to life.

The New York-based firm’s flagship hedge fund is up about 11% on the year, according to Bloomberg News. The $2.65 billion BlueMountain Credit Alternatives Fund has made $268 million on basis trades and other investments, the firm told investors in a May 14 letter, and it expects to make another $549 million on the trades.

CDS took a big hit last year following the collapse of Lehman Brothers and forcing federal regulators to intervene to facilitate the creation of CDS clearinghouses. Two are now operating in the U.S., although the one backed by BlueMountain, led by the CME Group and Citadel Investment Group, has yet to clear any trades.

Despite the turmoil in the CDS market, BlueMountain lost only 6% last year. The average hedge fund fell by double-digits.

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