ZURICH/LONDON, Feb 15 (Reuters) - JP Morgan’s trader Deepak Gulati is to give the Swiss hedge fund industry a boost with the second-quarter debut of a major fund, a source close to the matter said, in a tough environment for start-up managers.
His new firm Argentiere Capital was entered in Switzerland’s commercial register last July and has already raised a substantial sum of money for the fund, the source said, although he declined to confirm the sum or a fundraising target.
Publicity-shy Gulati, global head of equity proprietary trading at JP Morgan, will take his team of ‘black box’ traders with him, this person added, as the Wall Street giant looks to cut its proprietary trading arms at the behest of regulators.
Many banks have shed their proprietary trading arms or disbanded prop teams in response to the Dodd Frank Act of 2010, which curbs banks’ speculative bets with their own money.
The launch comes at a tough time for new hedge fund firms - even star names spinning out of banks - as they battle tough market conditions and investor nervousness.
Pierre Henri-Flamand, a former head of proprietary trading at Goldman Sachs, said in November he would shut his fund Edoma Partners, despite managing as much as $2 billion at one stage, after poor performance and seeing its assets shrink to $855 million.
Meanwhile, another high-profile launch, Azentus Capital, which was set up by former Goldman trader Morgan Sze and which also ran $2 billion at one stage, lost 6.8 percent in performance terms in 2011 and gained only about 1 percent last year.
The Financial Times reported on Friday that marketers expected Argentiere to raise as much as $500 million for its launch. Such an amount would dwarf most launches this year.
“If you can start with $500 million... then you’re really off to a very, very advantageous start,” said one prime broker. “The single most difficult thing for aspiring new managers is getting... new capital.”
While most European hedge fund start-ups still plump for London’s upmarket Mayfair district or close by, Argentiere is nevertheless one of several new fund launches slated in Switzerland this year.
One industry executive, whose company both seeds and provides services for emerging hedge fund managers, said his company was working on four launches of funds ranging in size from $50-$250 million scheduled for the second quarter.
A number of high-profile firms, most notably Brevan Howard and BlueCrest, have shifted operations to Switzerland in recent years. However, some traders have found life in Geneva expensive or have missed London’s buzzing night life.
“One of the difficulties of setting up in Switzerland is getting the people - the CFO (chief financial officer), tech people... In London there’s a ready-made talent pool,” the prime broker said.
Gulati’s new fund is likely to be a so-called ‘event-driven’ fund and focus on merger arbitrage, an investment style which seeks to profit from price discrepancies following merger announcements.
In the company’s registration Eamon Comerford, head of trading at Derivative Partners Invest AG is listed as a board member and signatory, while JP Morgan trader Michael Quinlivan is also a signatory and is named as Argentiere’s contact person on the Swiss company database ‘moneyhouse’.
Ernst & Young is named as group auditor.