Former Deutsche Bank colleagues Michael Sutton and Alex Mahler are teaming up again at Mahler's Alinor Capital Management to launch a new distressed debt hedge fund, which is expected to be one of the largest European hedge fund launches of the year, according to a report by Bloomberg.

The report cites filings at the UK's Companies House as confirming that Sutton is leaving the German bank after almost 20 years to join Alinor, which Mahler established in London in July.

According to unnamed Bloomberg sources with knowledge of the matter, the new fund is expected to launch with at least $500m in assets and will focus on debt tied to troubled corporations.

At Deutsche, Mahler and Sutton helped run the bank’s Distressed Products Group business in Europe, which looked to make money from loans and bonds tied to the riskiest companies, with Sutton serving as European Distressed Head of Credit and Legal Analysis.