Merrill Lynch Investment Managers is preparing its second alternative investment vehicle, a European long/short equity hedge fund.

Merrill Lynch's hedge fund is understood to be adopting a bottom-up research process taking advantage of existing in-house capabilities, according to hedge fund sources. Its European equity team is run by Michel Legros, who is thought to be involved with the new fund. Of a total of $571bn (€ 651bn) in assets under management, Merrill Lynch has some $1.5bn invested in hedge fund strategies.