As a result of the Volcker rule, banks have begun divesting themselves of their proprietary trading desks. Goldman Sachs has led the way. Two superstar traders have raised $1.6 and $1 billion dollars for their own hedge funds. JP Morgan will move its traders to the asset management division and Morgan Stanley will spin-off its quantitative team - Process Driven Trading.
The Reuters article believes that 10%-15% of the trading desks will become hedge funds. However, investors are cautious about committing capital to them. A Credit Suisse survey has only 52% of investors would seed a fund if it had a three year history. Not enough is known about a prop trader's performance. How much can be attributed to the trader and how much can be attributed to the bank's assets - name, balance sheet, execution platform, etc.?
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