Goldman Sachs Group Inc.'s principal strategies business, a group that makes bets with the firm's own capital, plans to transform into a fund and raise outside money, a person with direct knowledge of the decision said.
Goldman Sachs may announce as soon as Friday plans to discontinue the business, which is part of the banking company's equities unit, the person said, declining to be named because the decision has not been made public. The team, which aims to complete the process by the end of the year, has not set a target for the amount it wants to raise, the person said.
The Dodd-Frank Act signed by President Obama in July prohibits banking companies such as Goldman Sachs from engaging in proprietary trading. Goldman Sachs Principal Strategies, the trading team led by Morgan Sze in Hong Kong may be keen to raise money before competition emerges from proprietary trading teams leaving other banks, said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York, in an interview.
"What you don't want to be is the 50th prop desk being spun out," Hintz said. "I think what they're saying is, 'Get out while the getting's good.' "
Goldman Sachs, which doesn't break out the size of teams like GSPS or their revenue or profit, has said it derives about 10% of annual revenue on average from proprietary trading activities.
Lucas van Praag, a spokesman for Goldman Sachs in New York, declined to comment. Last week, when asked to comment on the firm's plans for its proprietary trading teams, he said, "Given the changes coming to financial regulation, we are as you would expect reviewing those operations likely to be affected."
Under the Volcker Rule in the Dodd-Frank Act, banks would be allowed to contribute up to 3% of the equity in hedge funds or private-equity funds. Goldman Sachs has a history of investing with former traders who start hedge funds.