Investors with an appetite for risk will be able to put their money into a fund which invests in the distressed mortgage debt market.

The sub-prime crisis sparked the current economic downturn, with many homeowners defaulting on their mortgages and individuals and companies being forced to write off billions in "toxic assets".

But LOM Asset Management has seen the advantages of getting into a market which may rise significantly and offers the same risk as equity funds and successfully launched the Cahow Fund Class A shares in May, with Class B offerings available between July 15 and July 31.

The company also received almost $150 million in orders for the over-subscribed Butterfield Bank preference shares which officially listed on the Bermuda Stock Exchange last Friday in addition to setting up a new Euro fixed income fund in March.

The Cayman domiciled Cahow Fund was formed as a result of a number of clients expressing an interest in the market which is normally closed to most investors and LOM drew up a diversified portfolio with a minimum investment of $10,000.

The US Treasury has been trying to open up access to mortgage-related assets to a wider group on investors, with investment firms able to take advantage of low cost leverage via the Public-Private Investment Programme in order to alleviate some of the pressure these investment put on banks' balance sheets LOM created a Special Purpose Segregated Portfolio Company to carry out a similar mandate to buy relatively small investments that big investment funds overlook, with the fund's smaller size allowing it to buy these securities at a lower cost.

Jon Heckscher, vice-president and general manager of LOM Asset Management, said the company was fully subscribed for its original offering and looking to raise between $1.5 million and $2.5 million for the Class B shares.

"By staying small you can diversify and still buy these small pieces because nobody else is trying to buy this stuff," he said.

"We have a huge advantage of being able to buy it cheaper than large investors."

Mr. Heckscher said the fund had a similar risk level to equity funds, but the upside was greater and the downside was the same, and had attracted a number of new local clients due to its potential benefits.

"This is not a traditional bond fund - this is a high risk fund," he said.

"We are the first and only company to offer it to the Island and, with this small structure, also the first in the world.

"This gives clients the chance to invest in real estate or the asset-backed market without having to do it on their own.

"They can get a diversified portfolio, making it a small portion of their investable assets."

Mr. Heckscher said that the assets investors would be buying in the fund were very secure, most with credit enhancement and they would be entering into an industry in which individual investments had been oversold, despite the sector currently suffering as a whole.

But he added that it was important investors knew what they were getting involved in and the risks associated with it, despite his belief that the rewards outweigh the risks.

LOM Securities (Bermuda) Ltd. has also established itself as a member of the selling group for a Philippines mining company raising funds concurrently with a planned merger with a Canadian-listed issuer.