Jeffrey Larson, founder of the late Sowood Capital Management, is getting back in the game. But he won’t get fooled again, at least not by the same investments that sank his earlier effort.

Larson is in talks with investors to launch a new fund—smaller than Sowood, which once managed $3 billion—that will use its predecessor’s market-neutral strategy. But the new fund will be smaller and will scrupulously avoid corporate debt. Leveraged bets on corporate fixed-income instruments blew up in Larson’s face when the subprime collapse and credit crisis struck.

Larson has reportedly received interest from investors totaling between $250 million and $500 million.