It's no secret that in the wake of the collapse of Lehman Brothers, bond trading stood out as huge money maker for investment banks, offering large spreads, reduced competition and even higher commissions.

A paper from the National Bureau of Economic Research, as noted by the Financial Times, details how prices for TIPS and conventional Treasury bonds were "thrown out of sync" by as much as 23 cents on the dollar following the collapse of Lehman.

The NBER said the discrepancy narrowed during 2009, but it still provided hedge funds a massive arbitrage opportunity and led directly to "one of the most successful hedge fund trades in recent memory," reports the FT.

The little-known, New Jersey-based Barnegat fund, founded in 1999, went long on TIPS after the collapse of Lehman and then shorted conventional Treasuries of an equivalent maturity. As the pricing discrepancy narrowed, the fund reaped some huge gains.

The fund returned 132.6 percent to investors in 2009, beating the 130 percent return of David Tepper's Palomino Fund, which many pegged as last year's best-performing hedge fund.

For more:
- here's the Financial Times article

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