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Abstract
Oct 14, 2014 was a day of misery for many hedge funds. Managers were desperately trying to cut losses and raise cash after a drop in oil prices and a surprise US Treasury rally upended some of the year's biggest hedge fund trades, with the collapse of merger talks between pharmaceuticals firms AbbVie and Shire magnifying the pain for some. As Rinds sold assets, and losses spread across the industry; Napier Park Global Capital, a New York-based hedge fund specialising in credit strategies, was similarly busy -- but for very different reasons. Napier Park focused on credit default swap indexes, which saw massive dislocations as hedge funds rushed for the exits. The Markit CDX North American Investment Grade index and its high-yield counterpart were fairly priced in early October, according to Dorfman, with implied cumulative default losses in line with the 30-year median.