Edoma Partners LLP, the hedge fund started by former Goldman Sachs Group Inc. proprietary trader Pierre-Henri Flamand, plans to close after it lost money and assets shrank.
“This is very disappointing for everyone concerned,” Flamand, 42, said in an e-mailed statement today. “Considering the unprecedented market conditions, we felt the most responsible course of action was to return money to investors and cease investment activity.”
Flamand started Edoma in 2010 after stepping down as head of Goldman Sachs’s biggest proprietary-trading unit amid a government backlash against banks betting on markets. Expectations that Flamand would continue his success as a hedge-fund manager helped him to raise more than $2 billion from investors.
Through September of this year, the fund had declined 6.9 percent since it started trading in November 2010, prompting some investors to pull money. At least two partners left last month as the firm sought to cut costs amid investor redemptions.
Edoma manages about $850 million today, according to a person with knowledge of the matter who asked not to be identified because the firm is private. The process of returning money to clients and closing down the hedge fund will take three to four months, the person said.
Flamand’s fund focuses on so-called event-driven investing in which traders try to predict triggers for stocks and bonds such as corporate restructurings, mergers, management changes and share sales.
Event-driven funds climbed 4.6 percent on average since Edoma started trading two years ago as concern over Europe’s sovereign-debt crisis led to periods of high correlation between asset prices, making it difficult to predict price moves for individual companies, according to Chicago-based Hedge Fund Research Inc.
Partners who left Edoma last month include Oliver Haslam and Casper Lund. Haslam previously worked at Ken Griffin’s Citadel LLC and Paul Singer’s Elliot Management Corp., while Lund was previously employed by Goldman Sachs and Morgan Stanley.
Flamand, who led Goldman Sachs’s principal strategies group, was among the first proprietary traders to start his own firm as Congress sought to rein in risk-taking by lenders following a $700 billion taxpayer rescue of financial companies. Former employees of the principal strategies unit who joined him at Edoma include Ali Hedayat, Emmanuel Niogret and Evan Pearce.
President Barack Obama signed legislation in July 2010 that included a provision called the Volcker rule, named for its advocate, former Federal Reserve Chairman Paul Volcker. The measure restricts banks with customer deposits backed by the U.S. government from using their own money to make speculative bets on markets.
Goldman Sachs decided within weeks of the Volcker rule’s approval to shut down the principal strategies group. Other traders who worked on the desk and have since left to form hedge funds include Morgan Sze, who briefly replaced Flamand as global head, and Daniele Benatoff and Ariel Roskis, who started trading at London-based Benros Capital Partners LLP in June 2011.