Taula Capital’s newly launched TSO fund has suffered a sharp reversal after positioning for European interest rates to decline, with the concentrated strategy falling more than 12% in September amid a broader sell-off in global bonds, according to a report by Business Insider.

The report cites unnamed people familiar with the fund's performance as revealing that it is down 12.8% since its launch six months earlier up to the end of September. The strategy lost 12.2% in September alone, meaning most of its losses since inception came during the month.

Taula raised approximately $1.5bn for TSO in March, with investors subject to a lock-up until next spring, according to the report. The firm reportedly declined to comment.

The strategy had positioned for European interest rates to move lower, but instead faced a sharp increase in borrowing costs as inflation remained persistent and markets reassessed the outlook for monetary policy.

The bond sell-off was exacerbated by the continuing conflict involving Iran and increased borrowing by artificial intelligence companies, which have added to the supply of fixed-income securities. Global government bonds recorded their worst quarterly performance since 2024, with the Bloomberg global government bond index falling more than 2%, according to Business Insider.

French government debt was particularly weak, recording its worst quarterly performance in decades as investors focused on the country's fiscal position and political uncertainty.