According to the Financial Times (FT), which cited unnamed sources familiar with the matter, the team, which is led by Daniele Benatoff and Ariel Roskishas, sourced a $300 million investment to set up the fund.
Brummers & Partners, a European hedge fund, is believed to have been responsible for providing the capital to help fund the new launch.
The news arrives as many banks look to restructure their proprietary trading units in the wake of regulations approved by the authorities in the US which will see curbs introduced on the amount of their own funds banks can bet with.
Congress approved the Dodd-Frank financial act in the summer of 2010 as part of a bid to reduce the amount of risk US financial institutions are exposed to.
A number of proprietary traders from Goldman Sachs left the bank to join new hedge fund KKR&Co in October of last year.
Morgan Sze, another high-profile trader with the bank, left during the end of December to set up an Asia-facing investment fund.
By Jim Ottewill