When ex-Goldman Sachs (GS) Group traders Pierre-Henri
Flamand and Morgan Sze left the company, they were able raise “more than $4.5
billion for their own hedge funds, helped by the experience of having worked at
what once was Wall Street’s most profitable securities firm,” reports
Bloomberg. “So far, none of them has made money for clients.”
And Flamand and Sze were’t the one ones who left
Goldman Sachs to manage their own money. Daniele Benatoff and Ariel Roskis did
same. Yet, these four ex-Goldman Sachs traders “trailed this year’s stock
market rally after losing money in 2011.”
Timing obviously plays into this to some degree. Last
year was tough for many hedge funds and while they weren’t all lemons even some
very well-established and historically very successful hedge funds lost big,
like John Paulson’s Paulson & Co. The European debt crisis and a fragile
economy also invariably had a role. But, maybe it is simpler than that – maybe
it is just harder than they thought. As Matias Ringel, head of research at EFG
Asset Management, said, “In spite of their pedigree, many ex-Goldman prop traders
have found it much harder than they originally thought to make money.”
Bloomberg writes, “their failure to generate profits
from investments… highlights the differences between trading at a bank, with
its extensive research, technology and compliance operations, and running a
hedge fund where clients pay top fees and are less tolerant of risk.”
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