Blackstone Readies Fund Of Former Proprietary Traders’ Hedge Funds

Blackstone Readies Fund Of Former Proprietary Traders’ Hedge Funds
Sep 29 2010 | 8:56am ET
The Blackstone Group’s fund of hedge funds unit has struck upon a new business line: seeding former proprietary traders’ new hedge funds.
Blackstone Alternative Asset Management plans to launch a fund dedicated to seeding traders chased from banks by the newly-enacted Volcker rule, which bars proprietary trading. The new vehicle could close as soon as next month, Reuters reports.
The move comes after BAAM agreed to back a new hedge fund headed by Credit Suisse’s top commodities arbitrage trader, George Taylor. Blackstone is investing $150 million in the unnamed fund, which will invest in commodities and energy, as well as currencies and other macro strategies.
BAAM has $28.5 billion in assets under management.

 

Will those traders be able to make money outside of the realm of their former employers? :eek:

 

I personally think moving the money outside the banks realm is going to cause a big bang in the hedge fund community, and if it doesn't then something went horribly wrong somewhere. How can it not, spreading the government's TALF and TARP money and profits out into the open market? The more competition between funds the better. I know I'm going after this waterfall of cash.

 

Waterfall of cash is always a good thing. It means risk on. Risk on means volatility. I adore volatility.

 

I am curious too. There are so few true prop traders at banks. You read in the papers that only 20 or 30 people are leaving.

 

http://www.finalternatives.com/node/13986
JPMorgan Moving Prop. Traders To New Alts. Unit
Sep 28 2010 | 1:07pm ET
JPMorgan Chase has set up a new alternative investments unit within its asset management division and has begun transferring its proprietary traders to the new business.
Investments banks are rushing to do away with their prop. trading desks, which are set to be barred under newly-enacted bank regulations in the U.S. While Goldman Sachs has chosen to simply shutter its prop. desks, JPMorgan will move its equity, emerging markets and structured credit traders to the new alternatives unit, where they will manage money for clients rather than the bank itself.
“Colleagues who will transition have delivered strong risk-adjusted returns for the firm, and we are confident that clients will benefit from their investment experience and insight,” Mary Erdoes, CEO of JPMorgan Asset Management, said in an internal memo. The memo was first reported by Dealbreaker.com.
The prop. traders moving to the new unit will report to Erdoes. The transition, headed by co-head of global emerging markets Mike Stewart, will take a number of years, Erdoes and Jes Staley, CEO of JPMorgan’s investment banking unit, said.
Stewart, who will lead the new unit, is also working with Larry Unrein, who heads JPMorgan Asset Management’s hedge fund and private equity operations, to establish it. Stewart will remain in his current post through the end of the year.

 

All props lose in the long run, so why banks should keep them?
Banks are better off just passively investing in an index, and they now know it.