May 5 (Bloomberg) -- Merrill Lynch & Co. Chief Executive Officer John Thain expanded his cadre of former colleagues from Goldman Sachs Group Inc. by hiring Peter Kraus to oversee strategy and investments.

Kraus, who led Goldman's asset management business and oversaw the Global Alpha hedge fund before he left in March, will report to Thain, Merrill said today in a statement. He'll also serve on the New York-based company's management committee.

Thain, Merrill's chairman and CEO since December, is recruiting executives from Goldman, where he worked for about 25 years, as he seeks to restore profitability after three consecutive quarterly losses. Thain hired Goldman's former U.S. trading chief, Thomas Montag, last month to oversee Merrill's sales and trading business, wooing him with a $39.4 million bonus and a $600,000 salary. Kraus's pay hasn't been disclosed.

``He's bringing in people that he knows, and people he trusts,'' said Benjamin Wallace, an analyst at Grimes & Co. in Westborough, Massachusetts, which oversees about $800 million, including about 35,000 Merrill shares. ``The Street probably wants to have some different people in charge, given what the prior regime did to the company.''

Under CEO Lloyd Blankfein, Goldman's earnings climbed 22 percent last year to $11.6 billion, setting a Wall Street record. Merrill, led by CEO Stan O'Neal until he was forced to exit in October, lost $7.78 billion in 2007 because of writedowns tied to subprime mortgages. Goldman is the biggest U.S. securities firm by market value; Merrill is the third- largest.

`Strategy and Investments'

Merrill also owns the largest U.S. brokerage for individual investors, with more than 16,000 financial advisers.

Kraus will oversee Merrill's ``business strategy and investments'' as well as corporate acquisitions, according to the statement. He also will work with leaders of the firm's biggest businesses to identify ``cross-platform synergies,'' according to the statement.

``Peter Kraus will be a tremendous resource to me and the senior management team in identifying the best opportunities for growth and investment around the world,'' Thain said.

Other former Goldman executives hired by Thain include Noel Donohoe as co-chief risk officer and May Lee as chief of staff. Kraus, 55, was co-head of the Goldman investment banking team that advised financial institutions before he joined the private wealth management group and then took the lead in the fund management division.

Management Committee

Kraus's appointment to Merrill's management committee means the group has a majority of Thain designees. Newcomers represent six of its 11 members, including Thain, Montag, Kraus and Chief Financial Officer Nelson Chai. Longtime Merrill employees on the committee include President Greg Fleming, wealth-management head Robert McCann and general counsel Rosemary Berkery.

The influx of Goldman personnel may prove dispiriting to current Merrill employees, said Wallace, the Grimes analyst. ``The concern is that there's a morale issue at Merrill, with just constantly bringing in outside people instead of promoting internally,'' he said.

Merrill declined 96 cents, or 1.8 percent, to $51.75 as of 4 p.m. in New York Stock Exchange composite trading. The stock is down 3.6 percent this year.

Goldman's asset management business suffered losses in some hedge funds last year, paring the firm's performance-related fees. The Global Alpha hedge fund, once the bank's biggest, fell about 40 percent in 2007 because of wrong-way bets on currencies, equities and bonds worldwide.

Trinity, NYU

First-quarter revenue in the division rose 23 percent from a year earlier as assets under management jumped 21 percent to a record $873 billion.

Kraus received a bachelor's degree from Trinity College in 1974 and a master's in business from New York University in 1975. He started his finance career at the accounting firm Peat Marwick Mitchell & Co. and joined Goldman Sachs in 1986. He was named partner at Goldman in 1994 and became co-head of investment management.

In 2006 Kraus and his wife, Jill, donated $3.5 million to endow a teaching chair at Trinity in the name of one of his former economics professors, Ward S. Curran, according to a college newsletter.

Merrill is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.

Last Updated: May 5, 2008 16:23 EDT