Andrew Lubin, former CEO of the London unit of Steven Cohen’s SAC Capital Advisors, and Tim Pearey, former CEO of Odey Asset Management, have started a "first-loss" hedge fund in Europe, according to a report by Bloomberg.

A first loss hedge fund is one that provides capital to traders if they put in their own cash and agree to lose their money first when bets fail.

The launch comes at a time when money managers are finding it hard to raise capital from investors who are increasingly migrating toward multi-strategy hedge fund giants from Citadel and Millennium Management to Balyasny Asset Management where teams of traders invest across asset classes, according to the report.

First-loss funds are a niche part of the $4 trillion hedge fund industry and offer traders an opportunity to hold on to more of their profits in exchange for taking on the bulk of the risk.

Traders signing up for Lubin and Pearey’s London-based AB Asset Scale could keep as much as 60% of the profits they generate, higher than traditional industry payouts of 20% at major multi-strategy hedge funds, the report noted.