Morgan Stanley Prop. Desk In Hedge Fund Spin-Off Next Year

Jan 10 2011 | 1:48pm ET

Morgan Stanley’s quantitative proprietary trading desk will become an independent hedge fund firm late next year.

The process-driven trading group will be spun off as PDT Advisors at the end of 2012. All of the group’s roughly 60 employees are expected to join the new firm, which will be led by PDT chief Peter Muller.

Under the agreement reached between Morgan Stanley and Muller, Morgan Stanley will pull its own capital from the group over the next year as PDT begins to raise money from outside investors. The Wall Street giant will have an option to retain a preferred stake in PDT Advisors—and likely will, according to published reports—and will probably serve as its prime broker. PDT will acquire some assets from Morgan Stanley as part of the deal.

The spin-off will bring Morgan Stanley into compliance with the Dodd-Frank financial overhaul law, which bars banks from proprietary trading and forbids them from investing much of their own capital in hedge funds and other alternative investment funds.

With the exception of a tough 2007—which it shared with most quant. funds—PDT has posted consistent returns for Morgan Stanley since Muller set it up in 1993. In some years, the group was responsible for a quarter of the firm’s total earnings.

“PDT has generated an enviable track record with Morgan Stanley since its inception in 1993,” Morgan Stanley CEO James Gorman said. “We are delighted to continue our partnership with PDT as it looks to expand its business by taking on third-party investors.”

Morgan Stanley has already spun off its hedge fund unit, FrontPoint Partners.


In Depth

Part II: Roubini Talks Risk, Recovery And The Threat Of A Triple Dip Recession

Oct 21 2014 | 12:41pm ET

In the second half of our interview with Nouriel Roubini, FINalternatives editor...

Lifestyle

Balyasny Pays Over $6M For Lakefront House

Oct 22 2014 | 10:29am ET

A venture headed by hedge fund manager Dmitry Balyasny just paid $6.2 million for...

Guest Contributor

Hedge Funds Weather A Data Management Perfect Storm

Oct 22 2014 | 12:28pm ET

From a regulatory standpoint, nearly every development since the crisis has placed...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Demeter: Family affair

David and James Hamman launched their fundamental Livestock and Grains Program in March of 2010 but it really was decades in the making.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.