Boaz Weinstein, one of New York's best known credit traders, is leaving Deutsche Bank to set up his own hedge fund, shortly after it emerged that his division had made $1 billion in paper losses.

Deutsche Bank said this morning that Mr Weinstein, one of the pioneers of trading in credit default swaps, would leave in the second quarter to start an as-yet unnamed hedge fund.

He has been with the German bank for 11 years.

Fifteen of his colleagues from the bank's global credit trading division, of which Mr Weinstein is a co-head, will go with him to the new venture.

Colin Fan, Mr Weinstin's co-head, will take over sole responsibility for the division.

A Deutsche Bank spokeswoman said: "“We wish Boaz well in his new venture and look forward to working with him."

Sources said that the bank could offer the new fund prime broking services, act as a counterparty on trades or even take an investment in the hedge fund.

A proprietary trading desk overseen by Mr Weinstein made about $1 billion in losses on investments involving credit default swaps on Lehman Brothers in the fourth quarter of 2008, according to reports.

Deutsche Bank chief executive Josef Ackermann said last November that the bank would scale back some of its proprietary trading after its corporate banking and securities business made a loss of 798 million euros after writing down €1.2 billion worth of mainly credit-related asses.

But Mr Weinstein also oversaw the client-facing parts of the credit trading business and sources said that he was not under pressure to quit.

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