Tuesday, 30 August 2016
Last updated 14 hours ago
Mar 5 2012 | 4:47am ET
JPMorgan’s top prop trader is leaving the investment bank to launch his own hedge fund, which is likely be to one of the largest launches this year.
Mike Stewart, global head of proprietary trading and former head of emerging markets, is gearing up to launch his fund--Whard Stewart--in the second quarter, reports the Financial Times. The emerging markets trading team at the bank is expected to join him, though according to the FT, JPMorgan is not investing any money in the new venture. The fund will be based in London.
The move to break away from the investment bank means that Stewart and his group will have more leeway in trading, as the “Volker rule,” which is soon to come into effect in the U.S., bans banks from proprietary trading. Market watchers have warned that the rule will spur top traders to leave large banks and set up their own funds.
Steward had been tapped by JPMorgan to lead a new 50-strong alternative investments unit within the bank’s asset management business. By forming the new group, JP Morgan could effectively keep the traders in-house, but would be in compliance with the Volker Rule as the bank itself would not invest any of its own money with the new unit.
JPMorgan had been planning to seed a hedge fund in the new unit with $2 billion. Under the new U.S. rules forcing JPMorgan to move the desk to its asset management unit, a bank's capital cannot make up any more than 3% of the assets of a hedge fund. In order for JPMorgan to keep its investment in the new unit at $2 billion, then, the firm would need to raise nearly $65 billion from outside investors. It is not known if this capital requirement or inability to raise that capital led Stewart to leave the bank and start his own fund.
The bank has not yet named Stewart’s replacement.