Kapstream Capital, the fixed income boutique established by Kumar Palghat with support from Challenger Financial Services, will begin investing $100 million seed money on Friday and has won two commitments for a further $130 million.

The commitments have come from a multimanager platform and an industry super fund. Kapstream has also hired two more investment professionals in addition to the existing team of Palghat, Kathy Palghat and Nick Maroutsos. Stephen Mackie will join on June 21 from JPMorgan, where he had a short stint as a senior trader in the credit and rate markets division after ten years with Commonwealth Bank, culminating in two years heading up its derivatives and fixed income desk in London. For the second hire, Kapstream has ‘poached’ the head of Challenger’s investment analytics group, Madhu Gayer, although his transition will be phased and he won’t be full-time at Kapstream until September. Gayer had headed the team providing post-trade performance attribution, compliance and risk analysis across Challenger’s 30 managed funds and 30 institutional mandates. He will move to the pre-trade side at Kapstream, building its propietary risk systems, including value at risk, performance attribution and risk factor mapping. Challenger will move to replace Gayer, but Palghat said his backer recognised the value of part-owning boutiques, as they offered a potential career path and were a way of attracting ambitious young talent. Kapstream’s first fund will use a globalised range of strategies including carry trades, value trades and yield curve arbitrage to attempt to add 2.5 per cent alpha to the cash rate on an annualised basis. Investors will have a choice of fee structures, either 20 bps plus 20 per cent of returns over cash, or a flat 50 bps.

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