BlueMountain profits from loan recovery bets, says Bloomberg

Bloomberg reports that BlueMountain Capital’s Credit Alternatives Fund is up around 11% this year so far, citing a letter to investors. (The fund was up 8.8% from the start of the year to 30 April, according to data listed in Creditflux, suggesting a strong performance in May.) See original article.

The New York-based fund manager attributed its gains to successful basis trades, particularly buying loans hedged with unsecured credit default swaps on names such as Hertz, Tribune and General Motors, according to the article.

Another trade favoured by the firm is owning American Axle loans and unsecured protection, based on the belief that American Axle will follow GM into bankruptcy but that its secured loans will recover at 72%.