Goldman Sachs Hedge Fund

Like many large banks on wall street Goldman Sachs offers several hedge funds. A few of these took big losses this summer and in one case with the Goldman Global Opportunities Fund the firm had to inject $3B into the fund to keep it running ($2B of their own money). "Given the market dislocation, the performance of GEO has suffered significantly," Goldman said. "Our response has been to reduce risk and leverage." In other words their losses mostly came from using too much leverage in the first place.

"Many funds employing quantitative strategies are currently under pressure as recent conditions have resulted in significant market dislocation," Goldman said. "Across most sectors, there has been an increase in overlapping trades, a surge in volatility and an increase in correlations. These factors have combined to challenge many of the trading algorithms used in quantitative strategies. 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."

Other Goldman Sachs Hedge Funds

The two other funds that have recently come under fire include the multi-strategy fund Global Alpha and the North American Equity Opportunities Fund (NAEO). Goldman has said "The market dislocation impacting equity quantitative strategies has adversely affected NAEO's performance and has been a key contributor to Global Alpha's disappointing performance. We have reduced risk and leverage in these funds as well. At their current levels of equity capital, we believe the funds are positioned to actively pursue market opportunities."

Will Goldman Sachs Leave the Hedge Fund Business?

Never. Doesn't listen to journalists who predict Goldman's flagship fund going down in flames as an end to their play in this industry. The most recent trend with Goldman Sach's strategy towards hedge funds has been to invest and take partial ownership in dozens of medium to large sized hedge funds. This allows them to help grow these hedge funds while also participating in the upside of a diverse ray of hedge fund managers and strategies.

The Richard Wilson Hedge fund Blog (http://richard-wilson.blogspot.com) is a content rich source for hedge fund industry white papers, trends, articles and professional interviews. I also share lessons I learn in my investment marketing and sales (third party marketing) career and earning a graduate degree at Harvard. I live in Cambridge, MA and can be reached at 503.789.7901 or Richard@RichardCWilson.com. This post came from the Richard Wilson Hedge Fund Blog online at: http://richard-wilson.blogspot.com/2007/10/goldman-sachs-hedge-fund.html

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