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Wednesday, July 18, 2012

BlueMountain: We Swam With 'London Whale'

BlueMountain: We Swam With 'London Whale'

Shortly after appearing on a panel at CNBC and Institutional Investor's “Delivering Alpha” conference in New York on Wednesday, BlueMountain Capital Management chief Andrew Feldstein explained how his firm got involved in JPMorgan's disastrous bet on corporate debt, otherwise known as the “London Whale” trade.
It was through an arbitrage trade a year ago, and, more recently, by helping JPMorgan unwind the bank’s corporate-derivatives position this past May and June.
About a year ago, Feldstein said, BlueMountain shorted the CDX IG-9, a relatively illiquid credit index that tracks the debt of 121 different companies. At the same time, the firm went long the debt of the companies reflected in that index, profitably exploiting the gap in spreads between the index and the bonds.
Those trades are of the sort that the fund company engages in frequently, Feldstein said.

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