Goldman Sachs Said to Back Former Barclays Trader’s Hedge Fund
December 22, 2011, 12:56 PM ESTBy Jesse Westbrook and Lars Paulsson
Dec. 9 (Bloomberg) -- Goldman Sachs Group Inc. plans to provide funding for a hedge fund being started by Todd Edgar, a former commodities trader at Barclays Plc, said two people with knowledge of the preparations.
Goldman Sachs will make an investment through a so-called seeding fund that the New York-based firm started this year after raising money for it from pension funds and wealthy individuals, the person said. Edgar will get $150 million to $200 million from Goldman Sachs in return for a cut of the fees his hedge fund generates, said the people who declined to be identified because the negotiations are private.
The U.S. Congress last year restricted banks’ investments in hedge funds through the so-called Volcker rule after lawmakers concluded that financial institutions shouldn’t be using federally backed deposits for wagers on markets. The Goldman Sachs seeding fund is permitted under the law because it uses client money rather than the firm’s capital.
Edgar and his team of commodities traders left Barclays in the third quarter of this year. His fund will trade futures and options on metals based on the firm’s views of global economic trends, the people said. The fund will be based in New York and plans to start trading next year, the people said.
Joanna Carss, a spokeswoman for Goldman Sachs in London, and Edgar declined to comment. He joined Barclays, Britain’s second-largest bank by assets, from JPMorgan Chase & Co. in 2009.
Blackstone Group
Some hedge funds are turning to firms such as Goldman Sachs and Blackstone Group LP that provide startup financing because pension funds and other investors have shied away from smaller money managers since the credit crisis in 2008. Two-thirds of the asset growth for hedge funds since 2009 has been at firms managing more than $5 billion, according to Chicago-based Hedge Fund Research Inc.
Blackstone, the world’s largest private-equity firm, invests in hedge funds for a slice of a manager’s fees and an equity stake in the company. Hedge funds, private pools that try to make money whether markets are rising or falling, typically charge clients 2 percent of assets managed and 20 percent of any investment gains.
Edgar’s fund will be the second to receive an investment from Goldman Sachs this year. In September, Goldman Sachs invested $100 million in New York-based Palestra Capital Management LLC, a fund focused on stocks run by Jeremy Schiffman and Andrew Immerman, one of the people said.
Goldman Sachs has received about $600 million from clients to invest in startup hedge funds with plans to raise more money, the person said. Goldman Sachs’s hedge-fund investment effort is being led by two executives, Kent Clark in New York and Ali Raissi in London.
The firm shut an earlier seeding fund in 2008, a year when hedge funds lost 20 percent on average after the collapse of Lehman Brothers Holdings Inc.
--With assistance from Saijel Kishan and Katherine Burton in New York. Editors: Edward Evans, Steve Bailey.
To contact the reporters on this story: Jesse Westbrook in London at jwestbrook1@bloomberg.net; Lars Paulsson in London at lpaulsson@bloomberg.net
To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net.
