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Andrew Baker From Kirsten Bischoff, Opalesque New York:
Forcing proprietary trade desks out of banks has merely meant that the most successful of these teams have either already merged into large, established hedge fund firms, or have launched/are launching their own hedge funds. But while closing proprietary trade desks at banks may reduce the risk for deposit-taking institutions, that risk for the movement of large pools of money will remain in the market. "It’s important to remember that the risks won’t be eliminated," says Rodger Smith, a consultant at Research firm Greenwich Associates’ Investment Management Practice. "Instead, they’ll move out of the highly regulated bank industry and into the much less transparent world of hedge funds and shadow banking."
However, those proprietary trade teams who do not have the backing of their former firms (see: Morgan Sze’s $1bn launch) are still facing a struggle in raising assets. After all, prop traders whom have proven themselves successful have done so within the confines of large institutions that offer substantial infrastructure and high levels of research and support. Investors may be anxious to participate in the potential growth of a newly launched fund by a prop trading star, but many of them are still aware of the potential pitfalls that lay on the path t...................... To view our full article Click here
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