One year after one of the hedge fund industry's most talked-about collapses, failed fund manager Jeffrey Larson is raising capital for a new fund. 

The three-year old fund Sowood Capital, headed by Larson, lost roughly $1.5 billion of its estimated $3 billion in in a matter of weeks in the summer of 2007. Larson achieved fame in the hedge fund world with his work for Harvard University's endowment fund, where he produced returns averaging 15% between 1991 and 2004.

According to press reports, Larson is back in town, calling on investors to raise capital for a new fund.

Reuters reports that Larson has teamed up again with Megan Kelleher to form Larson/Kelleher Capital Management—LK Capital for short. The investment firm is said to have a staff of 18 and aims to create a limited leverage, value driven portfolio. It will focus on stocks of small- to mid-sized companies which have declined in value thanks to the housing market collapse, and carve out a niche offering short-maturity debt for leveraged buyouts, Reuters reported.

It's unclear at this point how attractive the new pitch from Larson is to the investment community, as press reports called the reaction to LK Capital mixed. However, the fund's documents are said to include guaranteed twice-yearly redemption periods for investors if accompanied by 90-days notice.

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