Hedge funds are known for making short-term bets, dipping quickly in and out of markets to take advantage of swings in prices. But, under pressure to innovate, some big-name managers are looking at ways that they can invest for longer and at lower rates of return.

US hedge fund BlueMountain Capital Management is currently raising money for a fund that will invest in credit for three to five years and target lower returns than its flagship hedge fund, said people familiar with the matter.