Published: Wednesday, 4 Nov 2009 | 6:20 PM ET

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Tom Maheras, Citigroup's former president and the man at the heart of the firm's push into what eventually became tens of billions of dollars in toxic debt, is running a hedge fund that is up 84 percent so far this year thanks at least in part to some unusual investing.

CNBC has learned that contributing to Meharas' Tegean hedge fund's recent success is investment in Advance Micro Devices

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[AMD  Loading...      ()   ], and ironically his old firm, Citigroup. In a recent letter to clients, he calls the two investments "the top single name contributors to our results."

In about a year, the fund has grown from $75 million to about $150 million.

It's unclear exactly what type of investment Maheras has in Citigroup; the big bank's stock is still trading at severely depressed levels, closing today just under $4 a share

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[C  Loading...      ()   ]. But the stock has recovered somewhat from its all-time low of 97 cents back in March.

Maheras, for his part, declined repeated requests for comment about his fund's performance, or his continued unusual ties to his old firm Citigroup, from which he was ousted in 2007, when losses in the firm's fixed income portfolio began piling up.

Eventually those losses led to the ousting of his boss, former Citigroup CEO Chuck Prince, and combined with other bad market bets, led to massive government bailout of the troubled bank.

Maheras, for example, has recently become a prime brokerage customer of Citigroup, meaning he keeps an account there and Citigroup can process or "clear" trades for his fund. In addition, a person close to Maheras says one of his investors is Citigroup founder Sanford I. Weill, as well as his alma mater, Notre Dame University.

Weill declined repeated requests to either confirm or deny his investment. A spokesman for Notre Dame wouldn't comment on the matter, but also wouldn't deny whether the school's endowment fund has an investment with Maheras' Tegean fund.

Tegea was an ancient Greek city-state (Maheras is of Greek ancestry) though the fund appears to be steering away from international investments.

Its focus appears to be US bonds and stocks. Maheras, of course, is a long-time bond trader, beginning his career at Salomon Brothers, which was purchased by Weill Traveler’s Group in 1997, before Weill merged his massive brokerage and insurance conglomerate with Citicorp to create Citigroup the following year.

In his letter to investors, Maheras summed up his outlook on the bond markets this way: "We expect credit spreads to continue their descent, albeit with some bumps along the way and will maintain long net exposures, focusing on credit selection."

He added that because of low interest rates, his fund can use "leverage" and borrow more cheaply to elevate returns, though he said the fund is focusing on a "more efficient and prudent use of leverage."

Good thing. Maheras was famous inside Citigroup and as a bond trader for using leverage to boost returns. But the same use of leverage, which magnifies profits when times are good, also can magnify losses on the way down. And that's what happened to Maheras, cutting short what was until 2007 a meteoric career on Wall Street.

Maheras was widely regarded as one of the best bond traders in the business, and he was a favorite of former Citigroup president and current JPMorgan Chase CEO Jamie Dimon, and Weill himself. Before his bad market bets, Maheras was also on the short list to replace Chuck Prince as CEO of Citigroup.

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