Goldman Redeems Itself

Goldman's troubled quant hedge fund have managed to mercifully remain out of the headlines for the past few months, but their shrinkage continues at an alarming pace, and it is looking bleak as Eli Broad and the the fund's parent pull capital out as the lock up expires:

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Eli Broad, the US billionaire, has also withdrawn the money he invested in August to help bail out the fund....The withdrawals comes after investors abandoned GEO and two other Goldman quantitative hedge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. FT

The funds are a rare misstep for 85 Broad, but we had argued at the time that the funds were toast and would eventually be closed. Goldman's attempt at spin was predicable, but these funds are shrinking faster than a frightened turtle:

GEO plummeted from more than $5bn of net assets at the start of August last year to just $1.2bn now owing to a combination of poor performance and withdrawals.  Goldman retains a $200m investment in GEO. The third quant fund, the bank’s flagship Global Alpha, lost 40 per cent last year and has shrunk from $10bn to about $2.5bn now.

To be fair, Goldman has fought a admirable retreat from this debacle, the unwind has been orderly and they minimized losses along the way. But the Street can see through the spin, and Goldman’s quant funds will likely soon be a footnote in history. Hopefully the recently formed fundamental long/short strategies started by Goldman’s prop traders fares better.

Goldman reclaims most of $2bn rescue funds
Financial Times

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