Greg Coffey’s Kirkoswald Asset Management is preparing to launch a new hedge fund focused on emerging markets credit, as strong investor demand for alternative strategies continues to support expansion among major managers, according to a report by Bloomberg.

The report cites unnamed people familiar with the plans as revealing that the London-based firm, which oversees around $20bn, is spinning out an emerging markets credit strategy from one of its existing funds.

The new vehicle is expected to begin trading next year and will take a more directional approach, focusing on opportunities in high-yield sovereign debt, the sources said. They requested anonymity because the plans have not been publicly announced.

The strategy will be managed by the former Emso Asset Management team led by Giorgio Lombardo. Coffey, who built his reputation through macro and emerging markets investments, will not be involved in managing the new fund, according to the sources.

Kirkoswald reportedly declined to comment.