“The combination of precise formulas with highly imprecise assumptions can be used to establish, or rather to justify, practically any value one wishes . . .Calculus . . . [gives] speculation the deceptive guise of investment.”
--Benjamin Graham, 1949
Goldman Sachs is holding a conference call to recent hedge fund performance. Today the firm announced that Goldman Sachs itself and some of its friends are investing an additional $3 billion in Global Equity Opportunities, an equities quant fund. They aren't going to call it a bailout. Instead they'll probably say something like the investment allowing them to "manage the delevering process." It's just getting under way. Feel free to listen by dialing 1-888-281-7154 (U.S. domestic) or 1-706-679-5627 (international).
Count how many times they use the word "opportunity" to describe market conditions. It's the hedge fund watch word of the day.
After the jump, the full statement from Goldman Sachs.
Update & Highlights: Goldman confirms losses at Global Alpha of 27%, half of which happened just last week. GEO down 30%, nearly all of the losses coming last week.
Further Update: Replay Information: Missed the call? They are going to replay it on the Goldman web site. Watch here for a link when it gets posted. You can also listen in by dialing 1-800-642-1687 (U.S. domestic) or 1-706-645-9291 (international). The passcode number is 13217143. Replay should be available around 11:30.
Goldman Sachs Statement on Quant Bloodbath
The Goldman Sachs Group, Inc. today made the following
statement: Many funds employing quantitative strategies are currently
under pressure as recent conditions have resulted in significant
market dislocation. Across most sectors, there has been an increase in
overlapping trades, a surge in volatility and an increase in
correlations. These factors have combined to challenge many of the
trading algorithms used in quantitative strategies. We believe the
current values that the market is assigning to the assets underlying
various funds represent a discount that is not supported by the
Within its alternative asset platform, Goldman Sachs Asset
Management manages Global Equity Opportunities (GEO), an equity
long/short quantitative strategy fund. It had a net asset value of
approximately $3.6 billion before the equity investment. Given the
market dislocation, the performance of GEO has suffered significantly.
Our response has been to reduce risk and leverage.
In addition, Goldman Sachs and various investors, including C.V.
Starr & Co., Inc., Perry Capital LLC and Eli Broad, are making a $3
billion equity investment in GEO. We consider this an attractive
investment opportunity. Existing investors in the fund will also have
the opportunity to participate. The investment will also provide the
fund with more flexibility to take advantage of the opportunities we
believe exist in current market conditions.
Goldman Sachs Asset Management also manages Global Alpha, a
multi-strategy hedge fund and the North American Equity Opportunities
Fund (NAEO), an equity long/short quantitative strategy. The market
dislocation impacting equity quantitative strategies has adversely
affected NAEO's performance and has been a key contributor to Global
Alpha's disappointing performance. We have reduced risk and leverage
in these funds as well. At their current levels of equity capital, we
believe the funds are positioned to actively pursue market
A conference call to discuss this investment will be held at 9:00
a.m. (ET). The call will be open to the public.