Regulatory rumblings to limit proprietary trading at Wall Street investment banking firms apparently have many traders checking out their options at other institutions, or starting their own hedge funds.
The Wall Street Journal reports that private investment funds looking for skilled traders are ready to snap up those who are interested in switching jobs. The article mentions Greg Lippmann, for instance, who helped Deutsche Bank AG earn billions betting against mortgages, has left to start his own hedge fund.
Another example is Blackstone Group, which is raising another big “seeder” fund to dole out money to proprietary traders and other investment professionals who want to start their own hedge funds.
Seeding platforms give managers from $100 million to $250 million to start up a fund, in exchange for a share of profits. The new Blackstone fund is reported to be in the $2 billion range. Citadel has launched its second seeding fund as well, called Surveyor.
And yes, it’s not exactly shocking that Wall Streeters want to leave big firms to form their own hedge funds. But this time the pace is being driven by Washington lawmakers placing stricter limits on how Wall Street banks can use their capital for trading, and limiting the banks’ ownership of hedge funds and private equity funds.
They’re invoking the so-called “Volcker Rule”, named after former Federal Reserve Chairman Paul Volcker, which aims to curb bank risk-taking.
However, one thing that may put the brakes on traders jumping ship is the miserable fund-raising environment right now for most hedge funds. With recent volatility, the fund-raising environment, especially for new hedge funds, remains particularly tough.
What’s your take? Are there more job opportunities right now for traders to start their own firms? Do you know traders you know who are checking out their options a little more diligently? Are you? Add your comments below.