HONG KONG/SINGAPORE (Reuters) - Goldman Sachs Group Inc (GS.N) proprietary trading desk head Morgan Sze is setting up a 20-30 member team to start a Hong Kong-based hedge fund that’s expected to raise more than $1 billion, people familiar with the matter said.
The multi-strategy fund, which would be one of the biggest in Asia, is expected to take office space in Hong Kong’s ICBC Tower and would start operating in the first quarter of 2011, two people familiar with the matter said.
The team would comprise about 12 analysts and the entire trading desk would come from Goldman, three sources said.
“Sze needs at least $1 billion just to justify the size of operation,” a source familiar with the plan said.
Goldman Sachs declined to comment.
The Financial Times reported earlier on Thursday that Sze, one of Goldman’s top paid employees, had started raising money for a new hedge fund to be named Azentus Capital.
The fund may start trading with $1 billion to $1.5 billion and employ a number of strategies, including equity long-short, risk arbitrage and special situation investing, the newspaper said, citing unnamed sources.
Sources said Sze is Goldman’s highest paid trader, and in 2006 received a bonus of almost $100 million.
Investor confidence is returning after the financial crisis with some $42 billion of net inflows into the hedge fund industry this year.
Assets in Asian hedge funds crossed $125 billion for the first time since Dec 2008, according to consultancy Eurekahedge, boosted by portfolio gains and inflows as the region’s stronger growth prospects attract investors.
The Eurekahedge Asia ex-Japan Index recorded returns of 38.19 percent in 2009 and remains among the best performing hedge fund indices in 2010, with year-to-date gains of 9.36 percent.
Sze’s departure, while among the most high profile in the industry, may not be the last, one of the sources said.
Wall street banks are in the process of scaling back their proprietary trading desks to comply with the “Volcker rule” and letting some of their traders go, which limits the extent to which they can bet with their own capital.
Goldman is winding down its Principal Strategies Group, a unit of about 70 proprietary traders, while JPMorgan (JPM.N) is reassigning its proprietary traders to its asset management unit.
A Credit Suisse CSGN.VX commodity trader departed with a team of proprietary traders in September to set up their own hedge fund. Bank of America Corp (BAC.N) has also cut staff who traded for the bank’s account.
The loosely regulated and highly secretive $1.8 trillion hedge fund industry is estimated to employ around 300,000 people worldwide, according to research from industry body the Alternative Investment Management Association.
Additional reporting by Nishant Kumar; Editing by Muralikumar Anantharaman