(Bloomberg) -- D.E. Shaw is raising its second fund in roughly 16 months to invest in the synthetic securitizations banks issue to manage their capital requirements, one of the hottest asset classes on Wall Street. 

The money manager filed a private placement notice Wednesday to raise capital for D.E. Shaw Diopter Fund II. The document didn’t disclose how much money the firm hopes to raise, and a spokesman for New York-based D.E. Shaw declined to comment. 

Diopter II will have three co-portfolio managers, including Rich McKinney, Marianna Fassinotti, and Steve Eilenberg, according to a person familiar with the matter, who asked not to be identified discussing confidential details. All three are managing directors in D.E. Shaw’s discretionary credit business.

The first Diopter fund raised about $650 million in February 2023 to capitalize on banks’ synthetic risk transfers. The issuance of SRTs and related instruments reached a record last year, the person said, as banks sought to navigate an evolving regulatory landscape. 

Diopter II, like its predecessor, is expected to primarily pursue investments that banks use to optimize or reduce their capital requirements, in part through risk transfers or sharing, the person said. Banks use these transactions to manage risk, obtain regulatory capital relief and make more capital available for lending. 

D.E. Shaw, with more than $60 billion of assets under management at the beginning of March, has been investing in less-transparent portfolios of loans that don’t provide much information on borrowers, but do have details on the types of loans involved and their credit quality. The quantitative hedge fund firm then uses its data and algorithmic capabilities to analyze the portfolios to help identify the borrowers, assess risk and better price the deals. 

The firm has invested about $4.2 billion through more than 40 synthetic securitization deals since 2016, when it decided to dedicate resources to the asset class.

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