Goldman Sachs Downsizes Global Alpha Fund

Sep 20 2007 | 9:56am ET

Goldman Sachs is turning its former Cadillac of a hedge fund into a Buick. The firm is reducing its $6 billion Global Alpha fund’s leverage, restricting its size and aiming for less volatile returns.

According to an investor letter obtained by MarketWatch, portfolio managers Mark Carhart and Ray Iwanowski said they are adopting a shorter-term holding period for their positions because of “recent market activity and volatility.” Currently, they hold positions for “weeks and months.”

The dynamic duo also said the fund will adopt new leverage constraints and run at the lower end of its leverage range thereby generating less volatile returns than its historical long-term target.

The managers also noted that increasing investor interest in hedge funds, specifically quantitative strategies, is more than “we and many others appreciated,” but recent losses by quant shops will result in fewer and more agile players. "Our intent under these circumstances is to more aggressively limit the size of our fund to reflect this new environment and to increase our agility in times of market stress."

Global Alpha lost 22.5% last month.

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