A hedge fund that made stellar returns in 2007 by trading long and short positions on financial firms failed to keep up the momentum and suffered an 87% fall in profits the following year after losing more than 30% on its fund, according to accounts filed recently at Companies House.

Algebris, a UK hedge fund manager set up in 2006 with the financial and operational support of activist hedge fund The Children's Investment Fund Management - saw profits drop from £97m (€117m) in the year to September 2008 to £13m in the year to the end of September last year.