Goldman Sachs, one of the most profitable banks in the history of Wall Street, figured out a way to monetize relationships with its star traders, even as they left the firm in the wake of the financial crisis.
Goldman (along with other big banks) still had to find an opportunity to monetize ex-star traders. So it added its own stars to its own hedge fund platforms, which let Goldman simultaneously earn fees from valuable client relationships and make money from hedge fund managers that were quitting to launch their own funds.
But lets step back for a second.
Goldman Sachs’ trading desks once fueled massive profits for the investment bank — but that changed once regulators began forcing banks to dial down risk and instituted the Volcker Rule banning proprietary trading.
As a result, one trader who used to work at Goldman said that, post-crisis, there was an exodus of talent, leading to some of the bank’s top earners leaving to launch their own hedge funds.
“People ran for the exits,” after realizing the financial crisis would hamper the bank’s trading profitability, as well as their pay, said one ex-Goldman trader.
That trader, too, has since launched his own fund. But he still maintains a relationship with Goldman Sachs. Many ex-Goldman traders do, he said, once they split off from the bank.
And that’s just the way the bank likely wants it.
Goldman did not respond to requests for comment for this story; the ex-Goldman trader spoke with Business Insider under the condition that he, as well as his hedge fund, were not named, because he was not authorized to discuss his marketing relationship with the bank.
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