Kohlberg Kravis & Roberts is hiring part of Goldman Sachs Group Inc's proprietary trading team, in the latest sign of private equity firms widening their business beyond pure leveraged buyouts.
Goldman's proprietary trading desk is being shut down in light of the "Volcker rule," which limits the extent to which banks can bet with their own capital.
The exodus of traders gives KKR an opportunity to expand its business areas further, moving into the potentially lucrative long/short hedge fund space. Goldman has said proprietary trading accounts for as much as 10 percent of its revenue.
In a sign of their appeal, the Goldman traders had been in talks with a number of investment firms such as Perella, Weinberg and Blackrock Inc., before settling on KKR, sources previously said.
The transaction will see KKR hire about nine Goldman traders, led by Bob Howard, who heads Principal Strategies for Goldman's U.S. business. The team will be part of KKR's asset management unit, which manages $13 billion, and will join early in 2011.
KKR is likely to launch a long/short hedge fund next year, a source familiar with the situation said.
Goldman, in a statement, lauded the "strong performance record with a culture of disciplined risk management" of its former Principal Strategies business.
KKR co-founders Henry Kravis and George Roberts said in an emailed statement that the move is part of a strategic build-out of its asset management platform.
"Our goal has been to add new capabilities and exceptional talent that allow us to strengthen our product offering and better service our clients," they said. "Bob and his team will be an ideal fit for that objective as we've been impressed with their investment experience and performance as well as their ability to manage risk."
KKR's shares were up 2.5 percent at $11.66 while Goldman Sachs' shares were up 0.9 percent to $161.02.
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