Fotune Favours The Brave?

I recently returned from a trip to Canada. My flight was not going back until the Saturday so I decided to go to the airport via Niagara falls... never been there, thought it would be a box to tick on the 'things to do before you die' list.

While the Falls are indeed, impressive, I didn't realise they were in the middle of an industrial estate and overshadowed by tacky hotels.

There is a vantage point, right at the top of the Falls, where you are no more than a few feet away from water cascading down the escarpment and it gives you an odd falling of wanting to jump in. Obviously I resisted, or you would have heard about my death on CNN, but it did get me to thinking about the latest funds being raised.

Some intrepid investors are moving into the wounded structured credit markets, raising the hope that some stability may return. Dozens of asset managers have created funds since the start of the credit crisis to invest in distressed or mispriced asset-backed securities, collateralised debt obligations (CDOs) and other structured credit instruments.

"Some people have raised considerable amounts of money to invest in structured distressed assets," said Don Brownstein, chief executive and investment officer of U.S. hedge fund firm Structured Portfolio Management. "They believe there is blood on the ground, and they figure they will get to lap some up."

I can't help thinking that these investors are standing in a similar position as I was on the Falls.

OK, at some time there will be time to get into this market but is that now?

Start-ups are coming from groups with a track record in structured credit, such as Solent, Zais, Bluemountain and Structured Portfolio Management, banks such as Citigroup, Lehman and Goldman Sachs, and other big players such as Blackstone, AXA and PIMCO, along with a few hedge fund firms with no experience in structured credit, according to press releases, Web sites and industry sources.

"Some have been up and running since September; they probably started too early. Others have cash that is not deployed, and some are in the formation process," said Markus Kroll, a partner in Palomar.

A number of hedge fund groups now focusing on credit say they plan to give structured credit a miss, regardless of any opportunities. Pulling back from the edge Centaurus Capital Chairman Bernard Oppetit told the Reuters Hedge Fund and Private Equity Summit earlier this month, "Structured credit is not our style. We have always avoided correlation risk; it is a very dangerous market,"

To shield themselves from the consequences of short-term volatility and to be able to invest in illiquid securities, the new funds typically lock up investor money for three to five years, though that makes fund-raising difficult, Kroll said.

It seems to me that some of these funds are looking at this market in the same way thrill seekers have looked at the falls... build a sturdy barrel, take the leap and everything will be OK..15 have tried most died... including some guy on a jet ski in 1995...

Fortune favours the brave?... Good luck with that.