LONDON Veteran credit trader Iftikhar Ali is launching his own hedge fund firm, a source close to the new company told Reuters, as traders look to cash in on turbulent bond markets.
Ali, former head of international proprietary credit trading at Bank of America (BAC.N) and more recently hedge fund manager at Observatory Capital, plans to launch Rhodium Capital in the fourth quarter of the year, the source said.
Rhodium and Ali declined to comment.
Rhodium will take a "long-short" approach to trading investment grade and high yield credit in Europe, Middle East and Africa, trading bonds, derivatives and, opportunistically, sovereign bonds, the source added.
Shorting means betting on a lower price for a security in the future.
Ali is chief investment officer at Rhodium, while Jeffrey Tirman, the founder of Swiss-based credit manager Talisman Capital, is chief executive and chief risk officer. The investment team also comprises Yash Ganeshan, a former senior trader at Jefferies International, while the firm plans to hire a credit analyst.
The launch comes at a tough time for hedge fund start-ups, many of which are finding it hard to attract the large, institutional investors that now account for the majority of new money coming into the $2.4 trillion hedge fund industry.
Small funds in London are also battling with the cost of renting offices in the capital's plush West End, now the world's costliest office location, and the higher costs of complying with new European regulation that come into force this summer.
However, some funds are still able to raise capital from investors. According to Hedge Fund Research, 284 funds were launched in the final quarter of last year, above levels seen in the fourth quarters of 2011 or 2012, although the number of funds liquidated is also up.
Rhodium, which is based in London's upmarket Mayfair district and which is waiting on approval from Britain's Financial Conduct Authority, will launch with a "significant" amount of investor capital, the source said.
Ali was Citigroup's head of CDS trading in London until 2004, before working at Bank of America until 2009. He later ran portfolios at James Caird Asset Management and Millennium Management.
(Editing by Sinead Cruise and Mark Potter)