Has the Cadillac of hedge funds become a lemon?
Goldman Sachs’ once high-flying flagship hedge fund, Global Alpha, took a big hit in February, falling 5.7% while most hedge fund indices showed positive or flat returns. Bad bets on currencies, stocks and global bonds leave the fund, helmed by Mark Carhart and Raymond Iwanowski, down 2% for the year. The fund fell by 9% last year, the first down year in its seven-year history.
“The U.S. equity market-neutral strategy was down for the month,” the managers wrote in their monthly investor update, Bloomberg News reports. “The stocks/bonds/cash-timing strategy detracted from overall performance due to our short position in global bonds.”
The fund also bet against the Japanese yen and Norwegian krone in February, both of which rose about 2% against the dollar. But the decline was limited by bets on rising bond prices in the U.S. and Australia.
“Several of our funds are particularly volatile, as we have strived on behalf of our clients to optimize for capital efficiency,” the update explained. “Because hedge-fund products are complex, we believe no single metric on its own can comprehensively provide an assessment of the risks investors face.”
Returns, by contrast, are unmistakably hard and comprehensive.