A team of JPMorgan’s top proprietary traders is set to launch what will be one of the biggest hedge fund start-ups of 2012, breaking with earlier plans to stay within the bank amid US regulatory changes.
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JP Morgan Chase headquarters
London-based Mike Stewart, JPMorgan’s global head of proprietary trading, and former head of emerging markets, is set to start his own new hedge fund, Whard Stewart, in the second quarter, people familiar with his plans said. Mr Stewart’s emerging markets trading team at the bank is expected to join him.
The departures come despite word last week that US regulators will probably delay implementation of the so-called “Volcker rule”, under which banks are in effect banned from proprietary trading.
Whard Stewart is likely to attract significant interest from investors and will almost certainly be among the biggest new entrants into the hedge fund world this year, if not since the credit bubble burst in 2007. Similarly high-profile Volcker rule-related spin-outs from Goldman Sachsin 2010 by the bank’s most prominent proprietary traders, Pierre-Henri Flamand and Morgan Sze, raised $1bn each.
Mr Stewart’s departure, meanwhile, marks something of a setback for JPMorgan, where he had been chosen to head a new Alternatives Unit within the bank’s asset management business.
The unit was to house an estimated 50 traders from the bank’s three major proprietary trading operations, which were facing closure because of the Volcker rule. In the new arrangement, JPMorgan would be unable to invest in the unit’s funds but it would still benefit from a slice of the fees they earned from clients.
In October 2011, JPMorgan moved its credit prop desk, led by Fahad Roumani, into the new asset management operation. Mr Roumani’s new fund, which follows a relative value credit strategy, has already raised assets of $470m from several seed investors and is looking at opportunities in European debt markets.
Deepak Gulati, global head of equity proprietary trading at JPMorgan, is officially set to move into the asset management unit with his team of traders this year. However, Zurich-based Mr Gulati is now considering whether to set up his own new fund, people with knowledge of his thinking said. Officially Mr Gulati’s plans have not changed.
JPMorgan declined to comment on Mr Stewart and Mr Gulati. While Mr Stewart is understood to be leaving the bank on amicable terms, JPMorgan is not investing money with his new fund.