When Carmelo Haddad and Francisco Ghersi invested half their hedge fund's money into a soon-to-mature Venezuela bond in mid-January, only two outcomes were possible: the trade could go horribly wrong or it could pay off fabulously.

Haddad, left, and Ghershi

Photographer: Wilfredo Riera/Bloomberg

After all, the odds that Venezuela would make the Feb. 26 payment were far from good. Racked by political turmoil, the economy was on the brink of collapse as slumping oil prices deprived the government of much-needed income. At the time, traders put the chance Venezuela would default in the next 12 months at 80 percent -- by far the highest probability in the world.

Venezuela went on to make the $1.5 billion payment, handing the founders of Knossos Asset Management a return of 12 percent in just 45 days -- or an excess of 150 percent on an annualized basis.

"Every time a bond dies, people have their own war story," said Haddad, who together with fellow Caracas native Ghersi oversees the fund's $40 million in assets. "We had our ups and downs. It was painful with the rumors, but we were comfortable with the trade or we wouldn't have bet that much on it."

The pair has been reaping outsize windfalls on Venezuela bonds from a windowless den in a Caracas shopping mall since 2011, when they raised $1.5 million with the help of friends and family to found Knossos. The fund, which invests all its money in Venezuela assets, returned 29 percent last year, when junk-rated developing nation debt gained just 6.7 percent.