Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Davidson Kempner feasts on Lehman, Greek bonds

September 15, 2008, the day the 150-year-old Lehman Brothers declared bankruptcy.
Keith Lew | Flickr Vision | Getty Images

One of the largest hedge fund firms in the world continues to make money quietly by focusing on beat up loans—despite the general perception that bonds have little to offer investors.

Davidson Kempner Capital Management, the $22 billion New York City-based shop run by Thomas Kempner Jr., gained 2.8 percent in the first quarter in its Institutional Partners fund largely on so-called distressed bets like Lehman Brothers bonds, Greek government debt, and U.S. and European commercial mortgage-backed securities.

Read MoreHedge fund vultures feast on Lehman corpse

"So far, the fall in equities prices has not spread into the credit markets. However, the current market conditions are likely to create some dislocations, allowing us to put our additional cash to work at good spreads," Kempner wrote in a private letter to investors Wednesday.

Other winners in the first quarter included Signet, Kabel Deutschland and MAN.