Diameter’s traders Scott Goodwin and Jonathan Lewinsohn earned praise last spring when they correctly shorted First Brands Group, the auto‑part supplier whose 2023 bankruptcy sent shockwaves through credit markets. Their bet paid off as the company’s bonds and equity collapsed, delivering a tidy profit for the hedge fund. Emboldened by that win, the duo placed a reverse position later in the year, betting the distressed issuer would rebound enough to generate a second payout.

Market sentiment, however, stayed hostile and First Brands’ assets continued to languish, turning the new trade into a loss that erased much of the earlier gain. The episode illustrates how quickly fortunes can swing in credit‑driven strategies and why fund managers guard against over‑leveraging after a success. Analysts note that Diameter’s misstep may pressure its performance fees and could prompt tighter risk controls across similar short‑selling desks.

Investors will watch the fund’s next moves to gauge whether it can recover credibility after the costly reversal.