SocGen bankers quit to launch hedge fund

Thirty senior bankers from Société Générale’s alternative asset management team have left to set up their own hedge fund business with backing from an American private equity firm.

The team – including the head of SocGen’s $12.7bn global hedge funds business, Arié Assayag, and several of his most senior colleagues – have left amid growing pressures at French banks to curtail the bonuses of top employees.

The French government has recently clamped down hard on bankers’ compensation as a result of considerable public outcry – and hopes to persuade fellow G20 economies to follow suit at the Pittsburgh Summit.

Both SocGen and rival BNP Paribas, France’s two largest investment banks, have promised to curtail payouts to employees. So-called “golden hellos” – signing on bonuses for new staff – have already been mothballed.

Nexar Capital – the name for the new hedge fund venture – will be headed by Mr Assayag, with Eric Attias, the former chief executive of SocGen’s New York Asset Management business, as its chief investment officer.

The firm will be headquartered in Paris with an office in New York.

Nexar has been backed with seed capital by US private equity firm Aquiline partners – set up by Jeffrey Greenberg, the former chairman of Marsh & McLennan, the American insurance group, and son of Hank Greenberg, the former AIG chief.

Aquiline has also backed Nexar with a significant war chest to fund all-cash acquisitions, according to people familiar with the situation. The company will be looking for opportunities to acquire fund of funds businesses – many of which have struggled in recent months after massive investor redemptions from high net-worth clients damaged by the financial crisis.

Sources say that excluding acquisitions, Nexar aims to have raised $10bn in assets under management within five years.

The business faces a difficult market, however, with many questioning the ongoing viability of the funds of funds model in the wake of client outflows – or else demanding more from it.

Alongside a core fund of funds business, Nexar will also run its own specialist volatility hedge fund.

The volatility arbitrage fund, which will be used to diversify clients’ exposures and provide additional protection against severe market disruptions, will be run by a team of traders also poached from SocGen.

Mr Assayag’s departure from SocGen will be a blow for the bank’s alternative asset management division.

Mr Assayag joined the firm in 1999 and built the $12.7bn hedge fund investment business from scratch.

The bank has been scaling back, however. The UK arm of SocGen’s asset management business was sold to London hedge fund GLG earlier this year.