Pipe dreams are normally not the sort of thing hedge fund operators want to be associated with.

But Shane Rodgers and Arnie Klein, principals of Signal Capital Management LLC, have started raising money for a $250 million hedge fund in Los Angeles that will do that very thing. The duo hopes to carve out a niche by investing exclusively in private investments in public equity, or PIPEs.

A PIPE investment is one of the ways in which small public companies can raise cash quickly from private investors. In a PIPE transaction, investors typically receive stock at a steep discount, as much as 50 percent below the market price.

“The fact that they are raising a hedge fund focused on PIPEs will be distinctive for us,” said Tami Fratis, a partner at R Capital Advisors in Philadelphia, which is marketing the Signal Special Opportunities Fund to institutional investors. She added that while a hedge fund’s “track record is very important we decided to bring them on because of their distinct niche.”

Because neither he nor Klein has run a hedge fund before, Rodgers has sought to provide his firm with some clout right away. He has hired what he calls “blue chip professional firms” including law firm White & Case LLP in New York and custodian First Republic Bank in San Francisco.

So far Signal Capital has received $15 million in commitments from investors and plans to make its first investment next month.

“We want every investor to know we’re safe and secure,” said Rodgers, 45, who formed Signal Capital in 2001 and is a former chairman and chief executive of Chancellor Group Inc., a Las Vegas firm that trades for less than a penny a share on the unregulated Pink Sheets LLC. Klein, 53, Signal Capital’s president and chief operating officer, is a former asset manager, and broker at Merrill Lynch.

PIPE transactions have been the subject of increased scrutiny by the Securities and Exchange Commission. The SEC has investigated broker-dealers that have shorted shares prior to flooding the market with stock from a PIPE transaction, in order to drive down a company’s share price and take profits.

But Rodgers insisted that his hedge fund is interested primarily in smaller, risky and illiquid companies that can be enormously profitable “as the company executes their business plan and generates results.”

Though most hedge funds offer scant information about their investments, they are very popular among wealthy investors who accept higher risks to earn returns of up to 40 percent.