Lonely stronghold in besieged markets


Fixed-income arbitrage, one of this year's best performing strategies, faces a fresh onslaught as credit markets seize up

By Pete Gallo

Fixed-income markets thrown into disarray by the government's recent takeover of Freddie Mac, Fannie Mae and the American International Group (not to mention the demise of Lehman Brothers) are posing serious challenges to fixed-income hedge funds, whose steady performance has, until recently, provided investors a haven from this year's tough markets.

At least one fixed-income heavyweight, John Meriwether's JWM Partners, has talked about winding down on big losses (his