Goldman Global Equity Hedge Fund Rises 12% After Cash Infusion

Date: Thursday, August 23, 2007
Author: Katherine Burton, Bloomberg

Aug. 23 (Bloomberg) -- Goldman Sachs Group Inc.'s Global Equity Opportunities hedge fund rose 12 percent last week after the securities firm shored up the money-losing pool with $3 billion of cash, investors said.

Assets more than doubled to $7.5 billion as New York-based Goldman put $2 billion into the fund and raised $1 billion from investors including Maurice ``Hank'' Greenberg, the former chairman of American International Group Inc., and billionaire Eli Broad. The fund lost about 30 percent in early August as rising mortgage defaults caused stocks to tumble, upending the computer models its managers use to select trades.

Global Equity and other so-called quantitative funds rebounded as market turmoil eased, said the investors, who asked not to be identified because the Goldman fund's performance is private. James Simons's $29 billion Renaissance Institutional Equities Fund made up almost the entire 8.7 percent decline it suffered in the first eight trading days of August, investors said.

``Usually such behavior causes first pain and then opportunity,'' Simons wrote to investors on Aug. 10, referring to sudden swings in stock prices worldwide. As markets return to more normal conditions, ``we anticipate the possibility of an attractive opportunity'' for the fund.

The Standard & Poor's 500 Index fell 9.4 percent from its record high on July 19 to Aug. 15 before rebounding 3.9 percent in the past week.

No Bonus

Unlike Global Equity, Goldman didn't bolster its Global Alpha quantitative fund, which lost 27 percent this year through Aug. 13. Clients have asked to withdraw $1.6 billion, leaving Global Alpha with about $6.8 billion in assets, investors said. Both funds are managed by Mark Carhart and Raymond Iwanowski.

Andrea Raphael, a Goldman spokeswoman, declined to comment.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets and participate substantially in profits from money invested. The industry oversees $1.7 trillion, up 22 percent from the end of 2006, according to data compiled by Chicago-based Hedge Fund Research Inc.

Funds usually charge fees of 2 percent of assets and 20 percent of investment gains. Carhart and Iwanowski, both 41, haven't been able to take the 20 percent fee since Global Alpha fell from its 2006 peak. They'll have to return about 60 percent before they can resume taking a cut of the fund's profits.

To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net