Two former heads at the investment banking arm of German bank, Eurohypo have staged a management buy-out of its asset management arm to establish their own real estate business to exploit cyclical downturns, the Financial Times reported.

The move adds to a number of business developments in which investment firms and hedge funds have rolled out distressed property funds, aiming to exploit heavily discounted property values in different parts of the world, such as the US.

Paul Rivlin and Neil Lawson-May have bought the bank's funds operation, including two existing vehicles with more than  £550 million ($1 billion)  of managed assets, to form the platform for a new business called Palatium Investment Management, they told the FT.

The directors said the company is already preparing the launch of several funds in the next 18 months to take advantage of distress situations and invest in more resilient sectors in the European property markets, which are mostly in the midst of cyclical downturns.