MAURICE SALEM IS BY HIS OWN ADMISSION SOMETHING of a bond bore, happiest in the world of prepayment risk, negative convexity, reverse repurchase agreements and other bond market arcana.

This obsession has served Salem, the 35-year-old founder and managing director of Wharton Asset Management, and his investors well. From offices in Upper Brook Street, hard by the U.S. Embassy in London's swank Mayfair, he has been running family and outside money in a range of private offshore funds since 1993. Salem launched Wharton's first publicly available investment fund, Y2K Finance, in September 1999.

The $1.45 billion hedge fund's results are certainly eye-catching. Between September 1999 and May 2005, it has produced cumulative returns of 131 percent, net of fees. Y2K has not recorded a single negative month: It sports an average 12-month return of 16.75 percent and a standard deviation of a mere 2.84 percent. These returns have been...