A $3bn London hedge fund lost more than a quarter of its value on Monday as it became the biggest victim of the unwinding of a popular Japanese government bond trade.

Endeavour Capital, run by former Salomon Smith Barney fixed-income traders, told investors it fell 27 per cent. A highly leveraged bet on the spread between short and long-dated JGBs had been hit by contagion from the US financial crisis and domestic worries.