JPMorgan’s Gulati Said to Meet Investors as He Weighs Hedge Fund

Former Chairman of the U.S. Federal Reserve Paul Volcker
Paul Volcker, director of financial analysis at the International Tax & Investment Center and former chairman of the U.S. Federal Reserve. Photographer: Andrew Harrer/Bloomberg

JPMorgan Chase & Co.’s Deepak Gulati is holding talks with investors as he and a team of traders consider leaving the bank to start a hedge fund, said four people with knowledge of the discussions.

Gulati, JPMorgan’s head of global equity proprietary trading, attended a conference held by Goldman Sachs Group Inc. in Rome last week to meet backers, said the people, who asked not to be identified because Gulati’s plans aren’t public. About 20 JPMorgan traders work with Gulati, who probably wouldn’t start his firm before next year, the people said.

He follows a growing group of traders who’ve left firms including Goldman Sachs Group Inc. and Citigroup Inc. since the collapse of Lehman Brothers Holdings Inc. in 2008 triggered a global financial crisis and prompted regulators to try and limit risk-taking by banks.

The U.S. Congress in 2010 approved the so-called Volcker rule, named after former Federal Reserve Chairman Paul Volcker, to curtail banks from using their own capital to make wagers on stocks and bonds. While the provision hasn’t yet gone into effect, firms have been shutting down proprietary trading desks to comply with the law.

JPMorgan spokesman Patrick Burton declined to comment on Gulati’s plans. The trader, who is based in Zurich, didn’t return a call to his office seeking comment.

Volcker Rule

The bank decided in 2010 to move Gulati and other proprietary traders to its asset management business to comply with the Volcker rule, because money would be invested on behalf of clients. The New York-based company selected Mike Stewart to oversee the 50 relocated traders, a person briefed on the decision said in February 2011. The bank was considering giving them about $2 billion of so-called seed capital, which would be replaced with money from outside investors over time, according to another person with knowledge of the discussions.

Stewart, who had been co-head of JPMorgan’s global emerging markets business, has since left to start Whard Stewart Asset Management Ltd., a London-based hedge fund.

Gulati joined JPMorgan in 2003 from Dresdner Kleinwort Ltd., according to his registration with the U.K.’s Financial Services Authority.

U.S. lawmakers have called for the Volcker rule to be stiffened after JPMorgan disclosed last month that its chief investment office lost at least $2 billion trading derivatives. Prior to the disclosure, JPMorgan and other lenders had urged regulators to relax parts of the provision, arguing that strict interpretation of the rule could stop banks from hedging risks.

Gulati’s division is separate to the unit responsible for the JPMorgan losses.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE