Bush Cousin Heads to Lehman

George H. Walker had been CEO of Goldman's hedge fund strategies group.
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Lehman Brothers


has nabbed George H. Walker, the CEO of

Goldman Sachs

(GS) - Get Report

Hedge Fund Strategies, to be the global head of its $188 billion Investment Management Division, Lehman Brothers announced today.

Walker has already resigned from Goldman Sachs and could not be reached for comment. A spokesman at Goldman Sachs did not return a call.

Walker, who is President George W. Bush's second cousin, had joined the merger and acquisition group of Goldman Sachs in 1991 and became a partner in 1998. He soon grew to be one of the principal architects of Goldman Sachs' investment management strategy and was overseeing a $70 billion group of alternative investments, including hedge funds of funds and private equity investments.

At Lehman, Walker will oversee two and a half times the amount of assets under his belt at Goldman, as he will run a global group that includes not just alternative investments but also traditional assets, including mutual funds.He succeeds Theodore Janulis, who recently became global head of the firm's mortgage capital business.

Lehman Brothers' Investment Management Division includes Asset Management, which offers Lehman and Neuberger Berman proprietary products across traditional and alternative asset classes (Neuberger was acquired by Lehman in 2003.) In addition, the group comprises Private Investment Management, the wealth advisory group that caters to high-net-worth individuals, as well as the Private Equity group. Within the Investment Management division, Lehman runs an Absolute Return Strategies group, the hedge fund franchise, whose size a Lehman spokesman declined to divulge.

The move to Lehman represents a change of strategy in Walker's career. Among banks running large hedge fund franchises, Lehman does not come first. Goldman Sachs is the largest and the most prestigious, with the biggest fund of hedge funds group (estimated at $12 billion to $14 billion) and a single-manager hedge fund group known for its quantitative traders running macro-oriented strategies. Then comes

JPMorgan Chase

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, with approximately $9 billion in funds of funds and a $7 billion hedge fund (Highbridge Capital, acquired by the firm in 2004.)

Morgan Stanley

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is often seen as the third player, with approximately $7 billion to $9 billion in hedge funds assets.

Both Goldman Sachs and Morgan Stanley are front-runners in prime brokerage, which has

benefited from the growth of hedge funds industry wide. But the size and the position of Lehman in this market is more modest. An industry executive estimates that Lehman runs $2 billion to $3 billion in funds of funds. The firm also has a 20% ownership in Ospraie Management, the $4 billion commodity hedge fund that has

suffered losses of late. There is a lot to be done to grow Lehman's alternative business to the next level.

That's perhaps why Walker was hired in the first place. In a move that is uncommon in a firm that rewards the loyalty of long-term bankers, Lehman has offered Walker to join the firm's Executive Committee. "It's a higher position. For him to join the Executive Committee just coming in is a pretty big thing," says this executive.