The mists are beginning to clear. Both JPMorgan and Goldman appear to have decided what they are going to do with their prop trading teams, now that taking big trading risks is a no-no in the US.
JPMorgan is transitioning prop trading into asset management (but it might take forever). And here's the email telling staff what's going down:
'Message from Jes Staley and Mary Erdoes
As a result of new financial reform regulation in the U.S., we will transition our proprietary trading teams within the Investment Bank's Equity, Emerging Markets and Structured Credit businesses to Asset Management and will establish a new alternative investment management group for J.P. Morgan clients. We expect to complete this transition over several years.
As you know, J.P. Morgan Asset Management is a leading investment manager for institutions, financial intermediaries, endowments, foundations and individual investors. The IB colleagues who will transition have delivered strong risk-adjusted returns for the firm, and we are confident that clients will benefit from their investment experience and insight.
We have asked Mike Stewart to lead this initiative. Currently, Mike is the co-head of the IB's Global Emerging Markets (GEM) business and is a seasoned trading manager. He will remain co-head of GEM through year end, reporting to Daniel Pinto, and will begin to transition his responsibilities during this time. Mike will work closely with Larry Unrein, head of the Private Equity and Hedge Fund groups in Asset Management, to establish this group.
Please join us in congratulating Mike on his new role and supporting him, the team and our staff support partners as they work through this transition'.
Now Dealbreaker is suggesting that only the top performers will eventually move across to asset management, and that those who don't make the cut may be forced to look for alternative employment. Our read, however, is that the top performers will simply join a hedge fund, or start one themselves - especially if the bonuses on offer at asset management aren't as sweet as those there for the taking in the investment bank.
In the meantime, Bloomberg reports that, according to its sources, Goldman is in talks with Avenue Capital, KKR and Perella Weinberg about the sale of its principal-strategies business (prop trading). The Wall Street firm is keen to try and get some money for the sale of the unit, although this may be difficult as a number of traders are already thought to be fairly well along with their own plans to either work elsewhere or start up their own hedge funds.
Sources - Bloomberg, The New York Times DealBook column
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