BlueMountain Said to Help Unwind JPMorgan’s Whale Trades

Reuters/Eduardo Munoz

Bloomberg News – By Mary Childs, Stephanie Ruhle and Shannon D. Harrington – June 21, 2012

A hedge fund run by a former JPMorgan Chase & Co. (JPM) executive who helped create the credit- derivatives market is aiding the lender as it unwinds trades in an index at the heart of a loss of more than $2 billion.

BlueMountain Capital Management LLC, co-founded by Andrew Feldstein, has been compiling trades in recent weeks that would offset JPMorgan’s risk in Series 9 of the Markit CDX North America Investment Grade Index, then selling the positions to the bank, according to three people outside the firms who are familiar with the strategy. That allowed the bank, which is said to have amassed as much as $100 billion in bets on the index, to unwind trades outside the traditional web of dealers.

“They used BlueMountain to disguise what they were doing,” Peter Tchir, founder of New York-based macro advisory firm TF Market Advisors, said in a telephone interview. “It all gets a little bizarre and shows how screwy this whole market is.”

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