The extent of the bloodbath at Goldman Alpha in August - a 22.5% loss. The excuse - too many quant funds making the same trades. So what Goldman Alpha is saying is that its strategy of losing enormous quantities of money was emulated by too many other funds. That has been a problem. No? Actually we have no clue, but it seems like Goldman's excuse should just be - we made a ton of really stupid trades at the wrong time.
Goldman Alpha has lost a third of its value this year, and 44% from its peak in March 2006.
Other notable August "imitators" of Goldman Alpha -
-Red Kite Metals (the largest hedge fund with a metallic sheen) - down 20%
-Old Lane LP - down 5.9%
-The Renaissance Institutional Equities Fund - down 8.7% in the first 8 days of August, but then made the 8.7% back in the rest of the month - making the same trades as other hedge funds making money
Goldman's Global Alpha Fund Fell 22 Percent in August [Bloomberg]
Posted by , Sep 13, 2007 10:41AM
Phenomenal title. And true. Everyone wants to follow the winner.
Posted by Schadenfreude Fraud , Sep 13, 2007 10:43AM
Wow, down 44% is quite impressive! Time to replace the computers with monkeys throwing darts at a newspaper.
Posted by Anon , Sep 13, 2007 12:13PM
Global Alpha has to be liquidating--and there have been rumors for weeks that it is liquidating. Case in point:
- according to the Bloomberg article, the fund needs to return 80% from where it is now, before it overcomes the high water mark;
- according to the article, GA has received redemption notices for 20% of the fund ($8B); have fun raising that on a 10x leveraged book
- Goldman injected no equity into GA, whereas the firm put $2B into their equity opportunities fund.
Net net: Goldman is going to be unwinding several billion more positions over the next few months, and they just have decided not to panic the market by putting this news out because they want a more orderly market.
Posted by huh , Sep 13, 2007 12:18PM
Good. At most 10% of the 'quants' out there are worth a damn; and the field has needed some winnowing for years. This should clear out the wanna-bes -- and maybe shut down those ridiculous "computational/financial math" diploma mills.
Blowing up is unfortunate; blowing up because you're mirroring/mirrored by everyone else is stupid. Next up: the run on the fund. (Better than Pamplona!)
Posted by Carhart is a genius , Sep 13, 2007 12:45PM
Mark Carhart looked out over the packed New York conference room and told investors that Warren Buffett had it all wrong.
Traditional stock pickers like Buffett, a fabled raconteur, do have one redeeming quality, Carhart joked: "They tell great stories."
Buffett does tell great stories, about idiot managers who fall in love with their models while not appreciating the huge risks they are taking with other peoples money. But hey, why listen to guy who's compounded wealth at 22% for 50 years when you can listen to a guy who has a 44% drawdown in 18 months?
Posted by quantitative , Sep 13, 2007 1:01PM
"why listen to guy who's compounded wealth at 22% for 50 years"
We WILL NOT listen to Grandma Buffet, even if it means losing our whole stake.
Posted by Fake Warren Buffett , Sep 13, 2007 1:13PM
Hey, Carhart is a great trader but just "on the wrong side" of the trade.
Just think: All of the most powerful thinking Carhart could do got him to the position he is in today.
If he'd done the exact opposite of his "model" he'd be up 44% and playing bridge with me online...
Posted by huh , Sep 13, 2007 1:22PM
I've got nothing against Buffett. He invests his way, I invest mine. After all is said and done, we've all performed our capitalist duties and made the world more efficient.
My problem is with politicking middle managers and brain-dead-yet-self-entitled underlings. Hopefully, this conflagration will reduce their numbers.
Posted by @Fake Warren Buffett , Sep 13, 2007 1:27PM
wrong. trx costs and liquidity issues might have eaten up a large part of that. or if you're just too big in a trade and everyone knows it, no position will make money. massless ropes and frictionless pulleys don't exist in the real world. but 'don't stop believin', journey-man
Posted by FWb , Sep 13, 2007 5:32PM
Ritholtz Capital -12% in August
Posted by me , Sep 13, 2007 9:18PM
Reuters had an article yesterday that Renaissance Medallion fund is 'still up over 50% for the year".