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

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.