Goldman Sachs is learning the hard way that huge hedge fund inflows are not to be taken for granted.
For the first time since at least 2004, Goldman Sachs Asset Management reported no inflow for its alternative investment products. GSAM has certainly not been earning new investor dollars, as performance in the group’s alternatives products—which posted fantastic returns just two years ago—have declined precipitously both this year and last.
“There is not really much color to add; it was flat over the quarter,” Goldman CFO David Viniar told analysts, adding that the Wall Street giant is not giving up on its one-time cash cow. “We are pretty optimistic on the business, we are adding new products and I think over time you will see that grow.”
After taking in a whopping $32 billion, Goldman’s alternative products added just $2 billion in the first quarter before falling to zero in the second. The decline in both performance and inflows has hit GSAM’s bottom line, as revenues fell 13% in the six months to May 24.
Meanwhile, investors don’t seem to be giving up on the one-time “Cadillac of hedge funds,” Goldman’s Global Alpha, quite as quickly, in spite of its being in the midst of its second bad year in a row. Of its flagship, which is down about 6% this year, Viniar said there have been no “substantial” redemptions.
“People who are investing in the fund understand that it is a high-risk, very volatile fund.”