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Global Alpha and Global Equity Opportunities(Goldman Sachs) - Quantitative funds

Count of distinct funds: 2

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stories: forbes.com, wsj.com

The Financial Times has reported that Goldman Sachs has reclaimed "90 per cent of the $2bn it used to bail out" their Global Equity Opportunities Fund. The withdrawal came at the end of February. Per FT:

Goldman withdrew $1.8bn from its Global Equity Opportunities fund at the end of February, its first opportunity under a lock-up agreement made when it invested in August, according to people familiar with the quantitative, or computer-driven, fund. It wrote to investors last week to explain its decision but declined to comment on Wednesday

Eli Broad, the US billionaire, has also withdrawn the money he invested in August to help bail out the fund.

Mr Broad joined hedge fund Perry Capital and others in putting in $1bn to help rescue the fund.

The withdrawals comes after investors abandoned GEO and two other Goldman quantitative hedge funds, one of which – North American Equity Opportunities, or NEO – was closed earlier this year.

North American Equity Opportunities has been reported as imploded.

Further to the article, "GEO" has gone from around $5 billion in net assets to $1.2 billion now.

Regarding Goldman's Global Alpha fund, FT reports their net assets have diminished from $10 billion to $2.5 billion. Some part of this reduction is due to a loss of 40% in 2007.

Despite the troubles at GEO and Global Alpha, the funds continue on in hopes of making future profits though no fees will be earned until the funds have made back their losses. One wonders how long that will take.

Original Ailing 2007-08-09 — Global Alpha Fund:

Global Alpha fund

Forbes reports that Goldman Sachs' nine billion dollar Global Alpha quantitative hedge fund was down 16% for the year:

It was widely reported in the media on Thursday that Global Alpha, a mega $9 billion hedge fund in Goldman's asset management group, was down 16% for the year. According to people familiar with the matter, the fund has suffered the most in the last few months, when the markets were especially volatile.

...

Unlike the typical hedge fund, Global Alpha is a quantitative fund, meaning that its trades are determined by computers and convoluted mathematical models. Some quant funds are completely computer dictated, while others spew out investment options for a human trader to veto or accept. When the markets follow the laws of probability, quantitative hedge funds can cash out big. Traditionally, quantitative funds are considered low-risk instruments because they use historical benchmarks to analyze trades.

...

Back in its heyday, Global Alpha was one of the bank's best-performing jewels. In 2005, the fund boasted a near 40% return. However, like humans, computers are not perfect--nor can they predict the future. Global Alpha was also engineered to place big, risky bets--one unexpected swing in the market could take a major bite out of the fund. After years of consecutive growth, the fund started to wobble--in 2006 it fell 6%.

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Important: This fund is on our list of hedge funds that are apparently ailing or which we think are worth watching for any other reason. Ailing funds haven't shut down, but they've suffered significant value declines and/or temporarily halted redemptions. Funds on watch may not even have unusual declines, but may be posted if it is felt there may be risk of developing a more serious condition eventually.