A hedge fund has invested in a large life reinsurer.

Managers of Flagg Street Capital L.L.C., Cambridge, Mass., have told the U.S. Securities and Exchange Commission that it and related firms now own about 5.75% of the ordinary shares of Scottish Re Group Inc., Hamilton, Bermuda.

Flagg Street also is a major investor in companies such as Talk America Holdings Inc., New Hope, Pa., and Mariner Energy Inc., Houston.

Scottish Re, the second largest reinsurer in the U.S. life market, has run into problems with some of its reinsurance arrangements in the past few years, and company managers say they are trying to sell the company or find a “strategic investor” to put in large amounts of capital.

Standard & Poor’s Ratings Services, New York, recently cut its counterparty credit rating on Scottish Re to CCC from B plus, and Moody’s Investors Service, New York, says it “anticipates that it will take action on Scottish Re in the very near term, likely by mid next week.”

By next week, Moody’s should have more information about whether Scottish Re will be making a deal, the rating agency says.

Meanwhile, Eric Hovde of Hovde Capital Advisors L.L.C., Washington, has sent Scottish Re a letter warning that the firm will resist any deal that dilutes existing shareholders’ stake in the company or otherwise fails to reflect the company’s true implied value, Scottish Re says.

“A rights offering provides an outcome that is fairer for the shareholders of Scottish Re” than another type of transaction in the $8 range, according to a copy of the Hovde letter that Scottish Re has filed with the SEC.