A team of managers from Ignis Investment Management have set up an independent management company and announced the launch of their first hedge fund.

Castle Hill Asset Management began operations on February 1, 2010 and has also started trading for its newest hedge fund, the Castle Hill Total Return Fund.

The fund was launched with about $50 million of seed capital from friends and family and will invest in European credit, leveraged finance, loans and high yield on a long and short basis. It will also invest in some capital structure arbitrage and currencies and use credit default swap (CDS) strategies as well as public equity strategies.

Together with the Total Return Fund, the Castle Hill team manage a leveraged long-only fund and an unleveraged long/short fund. The company has brought about $2.1 billion in assets under management from Ignis.

Castle Hill partner Vikram Govindan said the spin-off came about because Ignis, which is owned by UK insurance group Pearl, was unable to take on third-party capital and it became apparent that there was a demand for investments from third parties.

The new company is majority owned by its nine employees and Ignis has retained a minority stake. Castle Hill's CEO is Brian Bassett, previously chief investment officer (CIO) for Axial Investment Management, part of Ignis.

Prior to joining Axial Bassett was head of European leveraged finance at Deutsche Bank, where he worked alongside Castle Hill's CIO Jaime Vieser. Vieser was head of high yield trading at Deutsche Bank before joining Bassett at Axial as head of fixed income.

Govindan said Castle Hill would be happy running the Total Return Fund to a capacity of between $750 million and $1 billion. The company would not start actively marketing it to external investors immediately, preferring to establish a track record and protect the initial investment.

However he added there had already been interest from some funds of funds and other institutional investors.

Govindan said the company's unleveraged long/short fund, using similar strategies, had posted returns of 35% since its inception in May 2009. He was "very comfortable" that the Total Return Fund would perform well over the next year.

The fund is domiciled in the Cayman Islands. Minimum investment is $100,000, £100,000 or €100,000. Management fee is 2% and performance fee 20%. #

LaCrosse Global Fund Services was appointed as fund administrator and to provide operations outsourcing services. Deutsche Bank is the fund's prime broker.

Maples and Calder and Proskauer Rose provided legal advice for the fund's establishment, while Weil Gotshal & Manges advised the partnership.