Just one year after Jeffrey Larson lost about $1.5 billion in one of the hedge fund industry's most spectacular blowups, he is trying to raise fresh capital for a new fund, people familiar with his plans said, according to Reuters.

"Larson is back and he has been calling virtually everyone in town, leaving no stone unturned," said a Boston-based investor who was contacted by Mr Larson but declined to be identified so he could speak candidly about the new fund.

Mr Larson's $3 billion hedge fund firm, Sowood Capital Management, lost half of its capital a year ago following heavy losses on his bond market investments.

Within days, Mr Larson, who once helped invest Harvard University's $35 billion endowment and still managed money for the school in his own fund, was forced to shut down his three-year-old company. Sowood became known as one of the hedge fund industry's biggest collapses, and Larson apologised to investors.

He is now approaching his past backers and others, highlighting his successes at Harvard and trying to convince endowments and pension funds that he's worth another bet.

Mr Larson and former Sowood legal counsel and managing partner Megan Kelleher have formed Larson/Kelleher Capital Management, an investment firm with 18 people that promises to manage a "limited leverage, value driven portfolio," according to a copy of the pitch obtained by Reuters.

The team, which includes Doug Francis, a Sowood alumnus who briefly moved to Tisbury Capital Management, promises to focus on stocks of small- to mid-sized companies that have been battered by collapsing financial and housing markets.

LK Capital will also focus on short-maturity LBO (leveraged buyout) debt, people who have seen the documents said.