A bond market basis trade that has attracted the attention of regulators concerned about financial stability risks has helped hedge fund Exodus Point to chalk up a gain of around 2% for the year to the end of March, according to a report by Reuters.
The report cites a letter sent by the $11.8bn multi-strategy firm to investors which was seen by Reuters, in revealing that basis and rates trading form over a fifth of the firm’s trading strategy’s risk allocation.
As well as generating gains from basis and inflation trades in US Treasuries, Exodus Point also made money from government bond trading in Japan and Europe over the quarter, according to the letter.
The firm employs a pass-through fee model whereby investors cover fund expenses including staffing and technology costs, in addition to a 20% performance fee.
