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Goldman hires Amaranth traders
Goldman Hires Amaranth Team
As the Street Woos Hedge Funds
By Henny Sender
The Wall Street Journal
Saturday, December 9, 2006
In another sign of Wall Street's intense interest in hedge funds, brokerage firm Goldman Sachs Group Inc. is hiring 17 members of the team that traded credit for the now-defunct Amaranth Advisors LLC, according to people familiar with the matter.
The group will become part of the alternative-asset-management business at Goldman Sachs Asset Management, which houses the Wall Street firm's hedge-fund investments and has $139 billion of its $629 billion in total assets under management.
Amaranth collapsed in mid-September when concentrated bets on natural gas went wrong. But the fate of Amaranth's nonenergy assets and its people shows that the demise of the fund, with losses of $6.5 billion, has hardly dented the hope that hedge funds can deliver outsize gains in a low-return world.
Amaranth's assets, including everything from illiquid investments in Asian companies to leveraged loans in European buyouts to U.S. mortgage securities, were sold off in hotly contested auctions at virtually no discount. Similarly, Amaranth's people have been sought after by hedge funds and investment banks. Other Amaranth traders have landed at banks including Deutsche Bank AG and J.P. Morgan Chase & Co., as well as at various hedge funds.
The new Goldman team, under former Amaranth trader Gregg Felton, will pursue credit strategies for the alternative-investment division, first with the firm's own capital and later, possibly, with clients' money. According to letters to investors, Amaranth's credit team was a big driver of performance during the first months of 2006. Mr. Felton couldn't be reached for comment.
In the race to build serious alternative-investment strategies such as hedge funds, investment banks have taken radically different approaches.
Goldman has chosen to largely grow organically, in contrast to Morgan Stanley, which has taken stakes in several hedge funds such as Avenue Capital. Meanwhile, Credit Suisse Group recently has shifted its emphasis from growing organically to forming strategic alliances with funds such as Ospraie Management.
The team Goldman hired will trade bank loans as well as more arcane so-called relative value trades, which involve trading different securities issued by the same company, whether in so-called capital structure arbitrage trades or convertible bond arbitrage, out of New York and Singapore.
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