Goldman & Friends Throw Third Troubled Fund A Lifeline

Aug 13 2007 | 11:46am ET

Another Goldman Sachs quant fund is on the ropes, but unlike its big brother, this one is getting a bailout.

Goldman’s Global Equity Opportunities Fund has plummeted 28% this month alone; the once $5 billion hedge fund has a net asset value of just $3.6 billion after the first two weeks of August, the Wall Street giant said. But while Goldman lets its flagship Global Alpha, which is down some 26% year-to-date and 40% since last July, twist in the wind, it has orchestrated a $3 billion equity investment in GEO.

“Many funds employing quantitative strategies are currently under pressure as recent conditions have resulted in significant market dislocation,” Goldman said in a press release. “Given the market dislocation, the performance of GEO has suffered significantly. Our response has been to reduce risk and leverage.”

Goldman is pumping $2 billion into the fund, while other investors, including hedge fund Perry Capital, Los Angeles billionaire Eli Broad, and insurer C.V. Starr & Co.—run by former AIG head Maurice Greenberg—will contribute another $1 billion. In addition, Goldman said existing GEO investors will have the opportunity to invest as well, provided they aren’t gun-shy after watching 28% of their investment evaporate in two weeks.

The investment bank strenuously denied that the capital infusion was in any way a bailout.

“We believe the current values that the market is assigning to the assets underlying various funds represent a discount that is not supported by the fundamentals,” Goldman said in the release. “We consider this an attractive investment opportunity…. The investment will also provide the fund with more flexibility to take advantage of the opportunities we believe exist in current market conditions.”

GEO is the third Goldman fund enduring a rocky summer. In addition to Global Alpha, the firm says the “market dislocation impacting equity quantitative strategies has adversely affected” the firm’s North American Equity Opportunities Fund. Last week, NAEO was reported to be down 15% through July 27, before the market bloodbath that sent its sister funds into a downward spiral.

In Depth

Related-Company Fees: Normal Industry Practice or Conflicted Compensation?

Nov 11 2015 | 4:23pm ET

Regulatory agencies as well as investors are increasingly exploring whether certain...


Ferrari Roars in Wall Street Debut

Oct 21 2015 | 4:28pm ET

Shares of supercar maker Ferrari jumped as much as 15 percent to a high of nearly...

Guest Contributor

Private Debt - What is the Opportunity?

Nov 11 2015 | 3:28pm ET

In this contributed article, Rob Allard, founding partner of Firebreak Capital...


Editor's Note

    Oct 21 2015 | 10:41am ET

    One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…