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Guggenheim Partners launches prop trading platform in pursuit of aggressive growth story

Wednesday, March 02, 2011
Opalesque Industry Update - Guggenheim Partners, a global diversified financial services firm, announced the launch of Guggenheim Global Trading LLC (GGT) which will invest capital on behalf of the firm, its shareholders, its affiliates and a small group of institutional investors. GGT will be based in Purchase, NY, and will be headed by Loren Katzovitz and Patrick Hughes, both managing partners of Guggenheim Partners.

“The current environment affords the firm a unique opportunity to hire seasoned talent out of what is a reshaped Wall Street landscape,” said Katzovitz. “As a private firm, we believe there are attractive opportunities to invest capital supporting trading strategies with high probabilities of success, particularly as banks are required to divest or significantly reduce their proprietary trading activities and smaller hedge funds find it uneconomical to continue.”

“Legislative and regulatory changes globally have created a unique timing opportunity with regard to the availability of high-quality traders and trading groups,” said Hughes. “The launch of GGT however, is not simply about access to talent; we further believe that the reduction in proprietary trading globally, as a result of the new regulatory regime, should ultimately result in wider investment spreads in arbitrage and other strategies.”

Guggenheim is launching GGT with an initial target allocation of approximately US$500 million, with a longer-term goal of US$2 billion over several years. The team will consider raising capital on a limited basis from third-party investors, but only to the extent that such third parties would be interested in being an equity partner with Guggenheim. GGT plans to hire approximately 20-25 trading groups within the next 12 months. While GGT may enter into strategic relationships with existing trading groups that have unique trading styles and strategies, its general preference will be to build its strategies outright.

“We look forward to growing this new business,” said Mark Walter, chief executive officer of Guggenheim Partners. “GGT’s innovative approach is consistent with Guggenheim’s philosophy of offering our clients and equity owners exceptional investment opportunities.”

“In light of long-term market conditions, we believe GGT has significant potential to produce many compelling investment strategies that will benefit the various needs of our clients,” said Scott Minerd, chief investment officer of Guggenheim Partners.

In 2002, Katzovitz and Hughes founded Guggenheim Advisors (GA), a hedge fund of funds managed account platform. In 2006, a 71.5% interest in GA was sold in a transaction that created compelling shareholder value. GA was subsequently repurchased by Guggenheim Partners. Katzovitz and Hughes have stepped down from their roles at GA in order to launch GGT. As a result, GA is currently under new leadership and pursuing a growth strategy supported by Guggenheim as well.

In addition to its headquarters in Purchase, GGT will have trading locations in Chicago, San Francisco, Geneva and a yet-to-be-determined location in Asia.

(press release)

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