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Journalism of Courage
Sam Jones & Hedge Fund Correspondent
Sutesh Sharma,Citigroups most senior trader,is preparing to launch his own hedge fund. Sharma,a close acquaintance of Vikram Pandit,Citi chief executive,is head of Citis $2 billion Principal Strategies unit. He has registered a new firm,Portman Square Capital,in the UK. The move is one of the first steps taken by Citi to begin winding down in its proprietary trading operations which involve speculating with the banks own capital in compliance with new US regulations.
The so-called Volcker Rule,a provision within the recently enacted Dodd-Frank Act,prohibits banks from gambling with their own money. Citi is known to have been planning for the wind-down of its prop trading operations for some time. The bank will provide a seed investment to Portman Square Capital,which will at first be run from Citi Capital Advisors,the banks alternative asset management platform,itself based in Portman Square. Over time Citis seed stake in Portman Square Capital will be run down as new,external money is raised by the fund to bring it into compliance with Dodd-Frank. The bank did not respond to requests for comment. While Citis prop trading business was sizeable at its peak,it never achieved the prominence or success of those run by rival banks. Others,most notably Goldman Sachs,ran far larger prop trading desks that have already spawned some of the biggest post-crisis hedge fund launches as they have been shut down.
Morgan Sze,Goldmans top prop trader in Asia,raised more than $1.5 billion for his new hedge fund,Azentus,when it launched earlier this year.
