Citi Prop. Trader Sharma Sets Up Hedge Fund

Aug 22 2011 | 1:49pm ET

Citigroup's top proprietary trader has founded a hedge fund with one of his colleagues and will leave the bank.

Sutesh Sharma, who leads Citi's principal strategies group, and Toby Lingard last month registered their Portman Square Capital with U.K. regulators. The new firm will launch its maiden fund next year and could feature other members of Sharma's group, which manages some $2 billion of Citi's money.

According to Bloomberg News, Sharma met with Citi CEO Vikram Pandit last month. With the Volcker rule, barring banks from proprietary trading, coming into effect next year at the earliest, Pandit—who worked with Sharma at Morgan Stanley and then at Pandit's hedge fund, Old Lane Partners, which was acquired by Citi in 2007—wanted to discuss Sharma's plans.

Citi had mulled moving Sharma's team to its Citi Capital Advisors alternative investments unit, where they would manage money for clients. But Sharma said he'd prefer to launch his own firm, a decision backed by Citi.

Citi will seed Portman Square, the Financial Times reports, an investment that will be wound down as the hedge fund raises outside capital.

Sharma is only the latest proprietary trader to make the jump to hedge funds in the wake of the passage of the Dodd-Frank financial regulation reform bill last year. Goldman Sachs prop. traders Pierre-Henri Flamand, Morgan Sze, Ariel Roskis and Daniele Benatoff have all started firms of their own. Others have joined existing firms, including Goldman's Karl Devine, Andrew Dausch and Brad Lord, who went to Brevan Howard Asset Management, as well as Goldman's Robert Howard, whose team has joined Kohlberg Kravis Roberts.

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