Goldman Sachs?s famed New York proprietary trading desk is headed to Kohlberg Kravis Roberts, as the investment bank winds down the operation to comply with new federal regulations for Wall Street.
Members of the team, led by Bob Howard, will help bolster K.K.R.?s own services as the now-public firm seeks to expand beyond its core private equity businesses. The firm has been building out its fixed income and capital markets divisions.
?This is part of a strategic build out of our asset management platform,? K.K.R. said in a statement. ?Our goal has been to add new capabilities and exceptional talent that allow us to strengthen our product offering and better service our clients. Bob and his team will be an ideal fit for that objective as we?ve been impressed with their investment experience and performance as well as their ability to manage risk.?
K.K.R.?s main rival, the Blackstone Group, already has four distinct operations, from buyouts and real estate investing to hedge funds to advisory services.
The move means the unwinding of a Goldman business that gave rise to many Wall Street luminaries. Once known as the risk arbitrage desk and now known as Goldman Sachs Principal Strategies, its alumni include Robert E. Rubin and hedge fund managers like Edward S. Lampert, Eric Mindich and Daniel S. Och.
But new rules imposed by the Dodd-Frank Act, the most sweeping overhaul of financial regulations in decades, limit banks? involvement in riskier investments like hedge funds and prop trading, in which firms bet their own capital.
?Over several decades, Principal Strategies has been a successful global investing business with a strong performance record with a culture of disciplined risk management,? Goldman said in a statement. ?We wish Bob and his team every success in their home.?
Morgan Stanley confirmed on Wednesday that it will spin off FrontPoint Partners, a $7 billion hedge fund it acquired in 2006, though it will retain a minority stake. And Citigroup and Bank of America have sold off various private equity assets.
Other members of Goldman?s prop trading desk abroad, like the Asia team led by Morgan Sze, have weighed options like setting up their own fund. And other firms, like Avenue Capital, were said to have expressed interest in acquiring Mr. Howard?s team.
? Peter Lattman
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