Hedge Funds

Muni turmoil strikes Palio

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Palio Capital Management of New York has emerged as another victim of the recent credit turmoil. Following losses stemming from a highly unusual selloff in high-quality municipal bonds, the firm has decided to close Palio Municipal Income Hedge Fund.

Palio, a munibond arbitrage specialist, was co-founded in May 1999 by Suzanne Sarka and Tina Hastings. Both founders are alumnae of Société Générale, where they focused on credit and interest-rate derivative products in the taxable and municipal bond markets.

Palio declined to comment.

The Palio muni fund, which was launched in July 2005, managed less than $100 million but had produced consistent