Goldman's Global Alpha Fund Declined 2.8 Percent in September

Date: Thursday, September 20, 2007
Author: Jenny Strasburg and Katherine Burton, Bloomberg

Sept. 19 (Bloomberg) -- Goldman Sachs Group Inc.'s Global Alpha hedge fund fell 2.8 percent in the first two weeks of September, adding to last month's record decline on losses from currency and stock trades.

The drop brought the fund's year-to-date decline to 34.9 percent, said two Goldman investors, who asked not to be identified because the returns aren't public. The Standard & Poor's 500 Index gained 0.8 percent in the month through Sept. 14. The fund lost 22.5 percent in August.

Global Alpha is ``actively working'' to make investment changes more quickly, limit borrowing and rank debt as a higher risk, according to a letter sent to clients yesterday by Mark Carhart and Raymond Iwanowski, the 41-year-old co-managers of the fund in New York. They said they expect ``fewer and smaller participants in the quant space,'' in which managers make investment decisions using complex computer models.

``We are also implementing some additional risk-management measures and techniques to help us to better predict and react more quickly to highly volatile periods,'' according to a copy of the letter obtained by Bloomberg News.

Cutting leverage may reduce the fund's returns, Carhart and Iwanowski said. Global Alpha has about $6 billion in assets.

Goldman spokeswoman Andrea Raphael declined to comment on the letter, which was reported earlier by the Wall Street Journal.

Redemptions Planned

Investors last month notified Goldman, the most profitable securities firm, that they plan to withdraw $1.6 billion from Global Alpha, or almost a fifth of its assets as of July 31.

Goldman injected $2 billion into Global Equity Opportunities, a quant fund run by Robert Jones, after it lost more 30 percent in the beginning of August. The fund, which also received $1 billion from outside investors, fell 1.9 percent this month through Sept. 14, according to investors.

Hedge funds are largely unregulated investment pools that can bet on falling as well as rising asset prices. Their managers gain substantially from profits on money invested.

Global Alpha lost about 9 percent in 2006. At the same time, hedge funds globally gained an average of 13 percent, according to Chicago-based Hedge Fund Research Inc. The fund has fallen 46 percent from its March 2006 peak.

Other quant managers fared better in August after a rocky start. James Simons's $29 billion Renaissance Institutional Equities Fund made up the entire 8.7 percent loss it suffered in the first eight trading days of August.

To contact the reporters on this story: Jenny Strasburg in New York at jstrasburg@bloomberg.net ; Katherine Burton in New York at kburton@bloomberg.net .