Guggenheim Grows

Terry Flanagan

Guggenheim Partners brings more prop to its shop.

The events of 2008 and 2009 brought a plethora of change to Wall Street, such that, some market participants claim they will never see the light of the “good ole’ glory days.”

Proprietary traders, which trade bank-owned capital at the industry’s top investment banks, feel the loss more than others, as regulations such as the Volcker Rule are attempting to end prop trading across the board.

Fortunately for them, many firms have found a way to cleverly workaround such rules, in some capacity. Prop traders have left the sell-side to pursue their own buy-side ventures, notably hedge funds, where they can still employ their own capital to practice esoteric, sometimes riskier strategies.

Guggenheim Partners, which manages more than $125 million assets, has taken a stab at becoming a trading mega-house with the launch of Guggenheim Global Trading (GGT) last March. This past week, GGT launched its first Multi-strategy Fund, representing GGT’s first internally managed hedge fund.

“Regulatory changes have created a unique timing opportunity with regard to the availability of high-quality traders and trading groups,” said Patrick Hughes, managing partner at Guggenheim.

“The launch of GGT however, is not simply about access to talent,” he continued. “The reduction in proprietary trading globally, as a result of the new regulatory regime, should ultimately result in wider investment spreads in arbitrage and other strategies.”
According to Hedge Fund Alert, the Multi-strategy Fund has approximately $500 million of proprietary capital under its belt, and will employ quantitative strategies spanning merger arbitrage, REITs (real estate investment trust), and make plays in the financial services and technology sectors.

Guggenheim is not ready to open the GGT Multi-strategy to outside investors for at least six more months, reported Hedge Fund Alert. However, GGT at large has plans to invest capital on behalf of the firm, its shareholders, its affiliates and a small group of institutional investors.

Based in Purchase, New York, the growing global GGT platform will be headed by Hughes, and Loren Katzovitz, also a managing partner at Guggenheim Partners.

“As a private firm, we believe there are attractive opportunities to invest capital supporting trading strategies with high probabilities of success, as banks are required to divest or significantly reduce their proprietary trading activities and smaller hedge funds find it uneconomical to continue,” noted Katzovitz.

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