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Once upon a time, the Goldman Sachs star on your resume meant you were headed for riches and success. But in the face of economic turmoil, heavy financial regulation and cautious investors that may no longer be the case.Pierre-Henri Flamand and Morgan Sze, the two biggest names to leave Goldman Sachs’ prop trading unit to start their own hedge funds in anticipation of the effects of the Volcker Rule, is living proof of that, according to Bloomberg.
Although both hired away more junior Goldman porp traders when they left, neither Flamand nor Sze’s firms—which began trading in 2010 and 2011 respectively—have generated returns for their investors, Bloomberg reported.
- Flamand’s Edoma Capital Partners, a London-based event-driven firm, has lost 2.4% since the fund’s inception in Nov 2010. In the same period, event-driven funds in general returned +3.9%, according to Hedge Fund Research.
- Sze’s Hong Kong-based Azentus Capital Management, also an event-driven fund, has lost about 4.8% since it’s April 2011 start. In that period, event-driven funds lost 2.2%, according to Hedge Fund Research.
The Goldman name certain helps when it comes to attracting investors, but as Flamand and Sze’s performance proves—nothing protects you against an unpredictable market. Their lackluster returns compared to other hedge funds highlights another interesting difference between prop traders that come from banks and guys that start out in hedge funds earlier—
Poor timing led to the slow start for the Goldman Sachs diaspora as the European sovereign-debt crisis and a fragile economic recovery in the U.S. dominated global markets. Yet their failure to generate profits from investments also highlights the differences between trading at a bank, with its extensive research, technology and compliance operations, and running a hedge fund where clients pay top fees and are less tolerant of risk.
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