Brevan Howard, the $20 billion London hedge fund, is sounding out investors about raising around $500 million for a new fund that would be listed on the London Stock Exchange.

The fund's reception will represent a crunch barometer of sentiment among hedge fund investors, battered by months of market volatility and a streak of losses or below-market returns.

Brevan will officially begin marketing the fund just days after the forced liquidation of a $2 billion bond portfolio run by Peloton, a London firm run by Ron Beller and Geoff Grant, former Goldman Sachs partners.

The asset firesale by Peloton prompted speculation that a rash of similar hedge funds were in distress or facing difficulties.

BH Global, incorporated in Guernsey, would mark Brevan Howard's only second listed fund, in the wake of the bumper-performing $1.5 billion BH Macro fund that was launched this time last year.

BH Macro acts as a feeder for Brevan Howard's main master fund, which places a variety of bets based on long-term views of fixed income and currency markets. It has generated a 37 per cent return for investors since its launch last March.

The fund's shares have risen 44 per cent since the listing.

Brevan Howard said the timing of any launch would depend on market conditions. Lord Turnbull, former Cabinet secretary and head of the home civil service, will chair BH Global.

The BH Global fund will be multi-strategy, offering more diverse exposure for investors. Morgan Stanley will sponsor the fund and, with Dexion Capital, a hedge fund consultant, act and co-ordinators and bookrunners for the capital raising.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax