Saturday, 20 December 2014
Last updated 21 hours ago
Sep 16 2011 | 5:01am ET
The Cadillac of hedge funds is headed for the scrap heap.
Goldman Sachs is liquidating its Global Alpha hedge fund, once among the industry's biggest, best-performing and most sought-after. The fund, which managed as much as $12 billion before the beginning of the financial crisis but now has just about $1.6 billion in assets, expects to return between 85% and 90% of the fund's assets to investors by the end of next month.
Goldman's decision to pull the plug on the fund coincides with a shakeup in the management of its quantitative investment team. Katina Domotorffy, who has run both the quant. unit and Global Alpha for two years, is retiring at the end of the year. Reuters reports that, despite the appointment of new leaders, the death of Global Alpha is the beginning of the end for the firm's quantitative hedge fund strategies altogether. More than two dozen members of the quant. team have left this year.
Global Alpha is down about 13% this year, according to published reports. That poor performance pushed several of its remaining investors to redeem, which in turn led Goldman to decide the 14-year-old fund's day was done.
The closure of Global Alpha was first reported by The Wall Street Journal.
Until it hit the skids in 2007, Global Alpha was one of the can't-miss propositions in the hedge fund industry. Set up in 1997 by Clifford Asness, who left Goldman a year later to found AQR Capital Management, the fund enjoyed its best days under Mark Carhart and Raymond Iwanowski, who led Global Alpha for a decade. But the two also presided over the beginning of the end for the fund, which lost 40% of its value in 2007. Carhart and Iwanowski handed the reins to Domotorffy in 2009.
By then, Global Alpha managed just $4 billion, a figure which halved following the exits of Carhart and Iwanowski. Domotorffy put up great numbers her first year—Global Alpha soared 30% in 2009—but the fund was flat last year.
Goldman is holding back between 10% and 15% of the fund's assets due to its claims against—and potential liabilities from the collapse of—Lehman Brothers. In its letter to investors on Wednesday, the bank pledged to "vigorously pursue a resolution with Lehman Brothers that is in the best interest of investors in the fund."
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