The Areca Value Discovery fund will blend fundamental credit deep value strategies together with fixed income trading strategies.

The core part of about 70-80 per cent of the portfolio will be invested in low volatility and specialised hedge funds strategies with asymmetric return profile, in particular into distressed corporate credit, distressed structured credit, capital structure arbitrage and direct lending.

The satellite part, about 20-30 per cent of the portfolio, aims to take advantage of the favourable trading environment in interest rates, currencies and other asset classes by investing in global macro strategies.

The fund's target is an annualized return of 12-16 per cent p.a. with a volatility of five per cent p.a. over a three to five years investment horizon.

Areca says the credit crisis has created outstanding investment opportunities to achieve superior returns while investing in the top of the capital structure.

It says there are a number of key evolving market dynamics contributing to the opportunities in the new credit cycle, in particular in the distressed credit market. Illiquidity and weaker fundamentals are leading to increasingly attractive credit spreads across the capital structure. Excessive balance sheet leverage, increased low grade issuance and poor technicals are creating unique investment opportunities in debt of distressed companies with a sound business, healthy asset base and attractive cash flow characteristics.

Son Nguyen, managing partner, says: 'The current dislocations create outstanding investment opportunity to buy substantially undervalued assets, especially in the top of the capital structure, at huge discounts. In the current environment, credit strategies do not need to deploy leverage to achieve high-risk adjusted returns.'