Matthew Cartwright, who headed risk management at ADM Capital in Hong Kong, has left the $1.6 billion Asian distressed debt specialist and is said to be starting up his own hedge fund, according to industry sources.

Cartwright, who joined ADM in 2003, is understood to be raising capital for an Asian distressed debt fund. He has been replaced at ADM by Mei Li via an internal appointment, according to Chris Botsford, the firm's chief executive.

Cartwright’s vehicle is set to join a couple of new Hong Kong fund launches with similar strategies. They include Myo Capital’s Special Situations Fund I, a private equity vehicle set up by fellow former ADM staffer Justin Ferrier, which aims to raise $300 million to invest in illiquid products, including distressed Asian bonds, distressed local-currency loans and senior secured leverage loans.

Meanwhile, mCapital, set up by Mark Devonshire – who previously oversaw Merrill Lynch’s proprietary credit trading operations in Hong Kong and London – is raising money for its European and Asian Special Situations Fund.

Structured as a hybrid hedge and private equity vehicle, mCapital's fund recently received €50 million ($70 million) in seed investment from funds of funds Advanced Capital and IMQubator. No fundraising target has been announced, although mCapital says the strategy has the capacity to manage more than $1 billion.

The time may be ripe to launch a distressed debt or special situations fund, given the healthy capital inflows into Asia’s hedge fund sector this year. However, the niche category still only appeals to a relatively small segment of investors.

While asset flows into Asian distressed debt hedge funds were negative in both 2009 and 2010, there have been some positive flows this year, according to Farhan Mumtaz, senior analyst at Singapore-based data provider Eurekahedge.

However, special situations and distressed debt funds are not very popular in Asia, compared with other strategies, such as long/short equity and event-driven, he notes, adding: “There are very few managers dedicated to this space, although we do see an increasing number of launches.”