Morgan Sze—reportedly the highest paid trader at Goldman Sachs—is said to be leaving.
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The Goldman Sachs booth on the floor of the New York Stock Exchange
Think about this:
1) Goldman Sachs is the most profitable firm on Wall Street.
2) Most of Goldman's profits come from trading.
3) Morgan Sze is reported to earn more than all other players in the most profitable area of the most profitable shop on The Street.
This is a big story about a big guy.
So where is Morgan Sze going—and why?
The latest reports say Sze is starting a new hedge fund, based in Hong Kong: And that his initial funding will be at least $1 billion—making it one of the largest in Asia. The new firm is said to be called Azentus Capital.
Sources also report that Sze will need a team of 20-30 people—and that the entire trading desk will come from Goldman.
The precise reason for Sze's departure is unknown: Goldman Sachs , thus far, has declined comment.
Much of the speculation about the causes of Sze's departure have centered on the "Volcker Rule" — which restricts the ways in which banks can engage in proprietary trading.
Proprietary trading—also known as 'prop trading' —is the practice of trading with the firm's own money, as opposed to the funds of clients or other parties. Prop trading at U.S. banks has often involved the use of leverage—with banks sometimes trading using thirty dollars in borrowed capital for every dollar of their own money at risk.
With prop trading restricted by the Volcker Rule, Sze departure may fit into a larger strategy for Goldman Sachs.
Reuters also reports that Goldman is winding down its Principal Strategies Group, a group made up of about 70 prop traders.
It is not yet known what kind of financial stake—if any—Goldman Sachs will maintain with Morgan Sze's new Azentus Capital hedge fund.
But Goldman Sachs isn't known for leaving money on the table—and the departure of their most profitable trader would seem an unlikely time to break with that precedent.
Look for more details to emerge soon—regarding how Goldman will profit from Sze's new venture.
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