One of London’s most successful hedge funds imploded Thursday when Peloton Partners put the assets of its $2bn flagship fund up for sale and froze its remaining fund after geared mortgage bets left it unable to meet lenders’ demands.

Rumours of the crisis at Peloton’s ABS fund, named best new fixed-income hedge fund last month, helped drive the high-quality mortgages in which it was invested to all-time lows this week as traders prepared for $9bn of assets to be dumped.