Goldman Sachs to End Proprietary Trading in CLO Debt at Hedge Fund Conference

Published: Mon May 17 2010

Asset-Backed Alert, an industry newsletter, reported on changes in Goldman Sachs’s CLO trading division in its May 14 issue. According to a person close to the firm, Goldman Sachs is ceasing proprietary trading in one type of structured debt. CLOs are instruments traded by proprietary trading firms, many of them to be represented at's upcoming High-Frequency Trading Leaders Forum 2010, "Innovating and Profiting from High-Frequency Trading in 2010 and Beyond" (, May 27th, 2010, at New York City's Flatotel Hotel.

Reporting on his story, Bloomberg BusinessWeek continues: "A group of traders who were focused on making bets on collateralized loan obligations with the New York-based firm’s own money are now handling trades for clients, the person said, speaking anonymously because the plans aren’t public. CLOs are bonds backed by pools of corporate loans. Goldman Sachs, the most profitable Wall Street firm, merged the proprietary trading desk with the team that handles transactions for clients as it wound down the positions in the proprietary trading book, the person said."

"CLOs are a type of collateralized debt obligation, debt instruments that repackage loans into securities of varying risk that pay investors different yields. The market boomed in the first half of the last decade, helping fuel a spree of leveraged buyouts by providing demand for loans that helped reduce the cost of funding. The market dried up in 2007 and 2008 as the mortgage market crisis caused investors to flee from structured credit into simpler and safer securities."

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