Tuesday’s Headlines: Trading Prowess at a Bank Doesn’t Always Translate to Hedge Funds

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Once a hot shot, always a hot shot? Apparently not, according to a Reuters story which explains that many star traders who left banks to launch their own hedge funds tend to net disappointing results. Former Goldman Sachs standouts Morgan Sze and Pierre-Henri Flamand started Hong Kong-based Sze's Azentus, which is down 4.8 percent in the 11 months that ended in February, while established but similar funds are down just 2 percent. Other shops have been open by traders from Credit Suisse, Deutsche and Morgan Stanley, whose ex-co-president’s Zoe Cruz is shutting her Voras Capital fund two years after it opened and suffered an 8 percent drop while the average hedge fund lost 5 percent.

One fund-of-fund partner told the news service she was skeptical of the long-term possibilities of these start-ups. “The question is: ‘How much can you really rely on the fact they will be able to reproduce what they were producing inside the bank where they had a lot of insights about flows and about what the smart money was doing?'” she said.

Challenges new hedge fund managers face include the fact that running a hedge fund requires a focus on back-office business functions opposed to a sole concentration on trading. Further, bank prop traders can pull back into cash when markets become too volatile, hedge funds “must invest across market cycles to justify the fees they charge their clients. Stay in cash too long and investors grow unhappy,” the story states.

 

Other News:

Dewey & LeBoeuf files for bankruptcy, marking the largest law firm collapse in U.S. history. [DealBook]

Goldman delayed the launch of its new bond trading platform on “logistical issues.” [Financial Times]

Citi broke up a committee created to oversee the disposal of toxic assets after the division’s assets shrunk by two-thirds. [Bloomberg]

Companies in Europe have doubled the American-leveraged loans year-to-date, compared with all such loans last year. [WSJ]

Barclays will sell its German housing unit Baubecon to the German real estate firm Deutsche Wohnen for $1.56 billion. [Bloomberg]

Asian magnate Richard Li considers a bid for ING’s life insurance business in the region. [WSJ]

Japanese trading house Marubeni will buy the grain merchant Gavilon for $3.6 billion. [NY Times]

Spain's Banco Popular is in talks to sell a majority stake in its Internet banking unit. [Dow Jones]

A rundown on the country’s top RIAs. [Investment News]

J.P. Morgan faces insider trading charges in Japan. [WSJ]

British regulators have issued a record $4.7 million fine against Dynamic Decisions Capital Management’s CEO. [DealBook]

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