Set up by Chief Investment Officer Christopher Gate in 2006, Oceanwood's flagship fund focuses on event-driven investing across the capital structure in European companies, with a second fund focused on financials.
Following the decision to appoint Garcia-Woods as number two to Gate, Deputy Chief Investment Officer Luke Lynch decided to leave to set up his own firm, the source said. Lynch could immediately not be reached for comment.
Garcia-Woods was promoted after leading on several of Oceanwood's best performing investment positions over the last 8 years in both equity and credit, the source said.
As part of the reorganisation, David Vaamonde has been promoted to partner, due to his "consistently excellent" performance in financials, while Antoine Chabanne had been hired as a portfolio advisor.
The hedge fund's most prominent recent bets include a deal to take control of Norwegian paper maker Norke Skog, which the source said was now closed after Oceanwood secured a $150 million co-investment from other parties.
Oceanwood first gained exposure to Norske Skog in 2015 through credit investments.
It also remains short a number of leading Greek banks and has profited from a slide in their share prices this year, making 135 basis points from a fall in Alpha Bank and 160 basis points from a fall in National Bank of Greece, the source said.
(Reporting by Simon Jessop; Editing by Kirsten Donovan and Jan Harvey)
By Simon Jessop