Goldman’s proprietary trading desk is being shut down in light of the “Volcker rule”, which limits the extent to which banks can bet with their own capital. The exodus of traders gives KKR an opportunity to expand its business areas further, moving into the potentially lucrative long/short hedge fund space. Goldman has said proprietary trading accounts for as much as 10 per cent of its revenue.
In a sign of their appeal, the Goldman traders had been in talks with a number of investment firms such as Perella Weinberg and BlackRock before settling on KKR, sources previously said. The transaction will see KKR hire about nine Goldman traders, led by Bob Howard, who heads Principal Strategies for Goldman’s US business. The team will be part of KKR’s asset management unit, which manages $13bn (£8.3bn), and will join early in 2011.
KKR is likely to launch a long/short hedge fund next year, a source familiar with the situation said.
KKR co-founders Henry Kravis and George Roberts said in a statement that the move is part of a strategic build-out of its asset management platform. Private equity firms have been expanding from their traditional bread and butter business of striking leveraged buyout deals in recent years, as the industry matures.