'Cruz Missile' Returns With a Hedge Fund

The planned hedge fund is likely to invest in a variety of distressed assets and make macroeconomic bets on currencies and securities, according to people who have spoken with the former bond-trading executive.

Ms. Cruz's move marks the re-emergence of one of the highest-ranking women on Wall Street when she was ousted in November 2007. During a 25-year career at Morgan Stanley, she ran some of the New York firm's most profitable trading desks, overcoming the male-dominated culture of bond trading.

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She and more than a dozen other senior traders and risk managers were ousted after a unit that reported to Ms. Cruz as part of her duties as Morgan Stanley co-president suffered a loss of $4 billion because of an errant bet on the mortgage market.