May 22 (Bloomberg) -- Merrill Lynch & Co.'s Ben Weston, chief of its hedge-fund development and management group, left after two years at the firm.

Weston is leaving Merrill immediately, according to a memorandum to employees today. The memo was from Rohit D'Souza, global head of the New York-based company's stock-trading and alternative-investments unit, which includes hedge funds, and Mac Gardner, head of the U.S. private client division.

The world's biggest brokerage reorganized its hedge-fund division in January 2006 and named Weston, a former Credit Suisse First Boston executive, to oversee sales of hedge funds to clients. Merrill said centralizing the business would improve its performance. The firm has bought stakes in hedge funds recently to benefit from outside money managers' returns.

``This could signal that they're continuing to have struggles in the hedge-fund business and they're hoping new leadership can turn it around,'' Fox-Pitt Kelton analyst David Trone, who rates Merrill shares outperform, said in an interview today. ``Having hedge-fund products available for private clients is strategically important.''

The brokerage agreed this week to buy a minority stake in Bennett Goodman's GSO Capital partners LP, its second investment in a hedge fund in eight months. New York-based GSO manages $8 billion. In October, Merrill paid an undisclosed amount for a minority stake in DiMaio Ahmad Capital LLC. The New York-based fund manager is run by Jack DiMaio, formerly chief of Credit Suisse's alternative-investments unit.

Consolidation

Merrill's consolidation of its hedge-fund business last year included the fund-of-funds unit that allocates investors' cash to fund managers. Weston also gained control of Merrill's Hedge Access database, which its brokers use to help clients pick hedge funds.

The firm does not break out revenue or profit for the hedge- fund division.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets and participate substantially in profits from money invested.

Merrill said May 16 Dow Kim, who led an expansion that doubled Merrill's trading revenue in three years, will leave to start a new investment firm. Kim, 44, co-president of the global markets and investment-banking group, was the most senior executive to leave Merrill in four years. The brokerage firm said it was considering investing in his new firm.

`Substantial Investment'

Weston was one of about 20 former Bankers Trust Corp. employees who set up a derivatives business in 1990 called Credit Suisse Financial Products. That group included Brady Dougan, 47, who was named Credit Suisse Group's solo chief executive officer in February. He's the first American to hold the job alone.

Merrill ``has made a substantial investment in our Alternative Investments business,'' the memo said. Employees who reported to Weston will report to D'Souza temporarily, according to the memo.

Weston didn't immediately return a call and e-mail seeking comment. Merrill spokeswoman Jessica Oppenheim declined to comment.

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

To contact the reporter on this story: Jenny Strasburg in New York at jstrasburg@bloomberg.net

Last Updated: May 22, 2007 20:00 EDT