Goldman Sachs Group Hedge Funds
Goldman Sachs Group Ending Hedge Fund Business
Goldman Sachs Group (GS) is wining down its Principal Strategies group, the profitable hedge fund factory. The Principal Strategies group once churned out some of the most successful hedge fund managers. But Goldman Sachs is responding to the new regulatory limits.
Goldman is responding to a new financial law in the U.S. that limits banks' ability to trade with their own money -- known as proprietary trading.
The so-called Volcker rule, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, also limits banks' investments in hedge funds and private-equity to no more than 3% of their Tier 1 capital, a closely watched measure of financial strength in the industry.
Goldman is closing down the Principal Strategies group, its main proprietary trading business, in response to the new rules, a person familiar with the situation said Wednesday.
Banks have several years to comply with the new law, but traders in Goldman's Principal Strategies group have begun talking with other asset-management companies about possibly moving to those firms, the person added on condition of anonymity. source