The fund will be managed by former Pimco Australia co-head Kumar Palghat and is initially aimed at institutional investors.
It aims to operate outside the traditional fixed income and hedge fund arena by targeting returns tailored to investors' future liability streams.
"A key differentiator will be our ability to tailor to individual client needs, and deliver stable income and alpha generation - we are excited about the future ahead of us," Palghat said.
Challenger will provide administration services to the fund and have sole global distribution rights.
"I was attracted by Challenger's ability to provide the infrastructure and backing that would allow us to concentrate on managing assets and producing returns for clients," Palghat said.
The firm said it would hire four staff by the end of 2006 and be operational by the end of the first quarter of 2007.
While Kapstream's primary focus will be on institutional mandates, Challenger also plans to launch a fund for the platform and retail market.
This is Challenger's fourth alliance with a boutique manager.
