A co-founder of Longacre Fund Management, a distressed-debt investor that moved to wind down its main funds last year amid client withdrawals, plans to spin off one of the firm's funds and manage it through a new venture.

Vladimir Jelisavcic, who started Longacre in 1999 with two other former Bear Stearns traders, told Longacre investors on Monday that he is launching a hedge-fund firm called Bowery Investment Management. At Bowery, Jelisavcic will continue to manage the Longacre Opportunity Fund, a distressed-debt investment vehicle he started in 2009. Bowery, which has $100m in assets, is looking to raise capital, people close to the firm said.