The WSJ has got hold of a letter from Goldman Sachs to its clients and reports the news that the bank plans to shutter its famed quant fund because of investor redemptions:
“We have begun liquidating the assets of the Fund,” wrote Goldman in its letter, a copy of which was reviewed by The Wall Street Journal. The securities firm said it will distribute 85% to 90% of the funds’ assets to investors, and will retain some cash to pay for possible legal costs tied to a claim made by Lehman Brothers Holdings, Inc.
Earlier in the day, Reuters reported that the fund had sent a prior letter to clients on Wednesday announcing a senior management change at the fund, which was down roughly 12 per cent year-to-date.
The fund had once managed $12bn at its peak, but it was caught in the quant meltdown of late 2007 when correlations among quant fund investments led to forced selling. According to Reuters, the fund now has an estimated $1.6bn in assets.
What’s happened to Global Alpha this year is, of course, completely different to what happened in 2007 — other quant funds haven’t suffered as much (not yet, anyway).