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Cheyne Capital Management (UK) LLP Friday launched a new onshore fund, the Cheyne Select UCITS Fund PLC, becoming the latest hedge fund group to create such a fund in order to avoid strict new European regulations for alternative investments.

The Cheyne Select Convertibles Fund, which will invest in interest-paying securities in a company and also give the investor an option to convert into shares, is just the first in a series of Ucits III compliant funds that Cheyne Capital will be rolling out over the next year.

Ucits, or Undertakings for Collective Investments in Transferable Securities, is the regulatory framework for European funds that comply with certain criteria relating to transparency, valuation and risk and can be marketed to individual investors across the region.

A number of hedge fund companies are taking advantage of the structure to pre-empt tough new regulation contained in a draft European Commission directive, which won't apply to Ucits funds. Thursday, Man Group PLC (EMG.LN) said it was launching an onshore version of its AHL managed-futures fund and similar Ucits-compliant funds have already been launched by Brevan Howard and GLG Partners Inc. (GLG).

"We are delighted to be adding to Cheyne's diverse range of product offerings with the launch of this new convertibles UCITS product. It represents an attractive opportunity for a wider range of investors to access this exciting strategy," said Jonathan Lourie, Cheyne Capital co-founder and chief executive.

Cheyne is the investment manager to the new fund, which is regulated by the Irish Financial Services Authority, and JP Morgan in Ireland, which acts as administrator and custodian.

-By Marietta Cauchi, Dow Jones Newswires; +44 207 842 9241; marietta.cauchi@dowjones.com