An uk hedge fund set up by the former head of canyon capitals london office is suffering its toughest year yet, say people familiar with its performance, joining a number of managers that were hit by market turmoil and have failed to recover.

Makuria investment management, founded in 2012 by mans larsson, lost about 29 per cent this year to the end of august, said a person who had seen the numbers. the firm tries to make money trading corporate credit, including distressed bonds those trading well below par value.

The poor run in 2020 has helped knock its assets, which grew to close to $600m last year, down to about $360m, said people familiar with the firms performance.

Makuria suffered big losses during this springs market chaos, after its positions in the energy sector were hard hit by the slump in the oil price. us oil prices fell into negative territory for the first time in history in april as demand evaporated during the coronavirus lockdown.

The fund also lost money on the bonds of infrastructure companies such as toll roads and airports usually seen as a steady and reliable source of returns which shed value as strict travel restrictions were brought in during lockdown.

Makuria declined to comment.

Harvard-educated mr larsson, 44, a former goldman sachs analyst, raised about $300m for makuria during a tough time for new launches in the wake of the eurozone debt crisis. the firm attracted hires such as chief operating officer matthew johnson, who previously worked at george soross soros fund management. makuria made gains of close to 10 per cent in 2017 and 9 per cent last year, but lost roughly 6 per cent in 2018.

A number of other credit-focused funds have struggled to rebound after a tough time in march. cqss michael hintze, for instance, suffered a $1.4bn loss by the end of may, largely because of bad bets on structured credit.

Multi-strategy credit funds are down on average 0.8 per cent this year to august, while directional credit funds which take more of a bet on credit market moves have lost 1.6 per cent as this years worst-performing strategy, according to evestment.

That compares with a 6.9 per cent return from investment-grade bonds and a 0.7 per cent return from high-yield bonds this year to august, according to indices run by ice data services.

However, some funds have used the sell-off as an opportunity to increase exposure. new york-based axonic capital, which also suffered losses this year, raised close to $1bn to invest in areas such as commercial and residential mortgage-backed securities.