Goldman Strikes Out, Still Swinging

Reading this month’s issue of Institutional Investor Extra:

Global Alpha, Goldman’s flagship quantitative hedge fund that began last year with $10 billion under management, continues to bleed assets following a 39 percent loss in 2007. The firm’s mathematical algorithms, which are designed to generate profit by capturing price discrepancies between stocks, stopped working in the equity market fallout from the subprime crisis. Goldman had to bail out another quant product, its Global Equity Opportunities Fund, with a $2 billion capital infusion in August when the subprime crisis caused big losses for that portfolio…

…Goldman CFO David Viniar revealed that GSAM suffered client losses of about $3 billion in the fourth quarter, with close to half of that coming from Global Alpha. He also warned of more damage to come. “We think redemptions in the first quarter will be even greater,” Viniar told analysts.

To help make up for that shortfall, Goldman is, gasp, launching a new hedge fund! Clearly, this will solve everything!

Goldman Sachs Asset Management has raised roughly $7 billion for Goldman Sachs Investment Partners, a new long-short equity hedge fund. The offering is the largest hedge fund launch ever.

“Goldman is undoubtedly the best hedge fund brand out there,” says James Hedges, president and CIO of Naples, Florida–based advisory firm LJH Global Investments.

Really? The best? Well, why is it that their flagship products have gotten hammered?

The article then gets even more gleeful, pointing to the successful hedge funds launched by guys who have left Goldman.

Sure! Great! Let’s all put our money with Goldman Sachs – the guys who couldn’t stand it there have made it big! And their flagship fund was only down 39% last year!

Goldman Sachs has a proven ability to make money when it’s their own money at stake. However, managing others’ money is a different story.

I think people should take their meds regularly, and give their assets to dedicated asset managers, not the banks who should rightfully act as intermediaries.

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