World comes to an end. Goldman Sachs net income survives. Well, almost, says Lex, agog at the Wall Street bank’s numbers on Thursday. It delivered a sound thrashing to hapless Bear Stearns, even in the area of hedge funds – where even gleeming Goldman has had a spot of bother. By investing in one of its underperforming funds, GEO, and inviting existing investors to do so as well, it managed to make some money out of the August rout for quants.
But what about the other one, asks Dealbreaker? The biggie. In August, the bank’s Global Alpha fund dropped an impressive 23 per cent, and is now valued at $6bn against last year’s $10bn.
But for the latest on the struggling fund, Dealbreaker gives you the latest letter to investors from the boys at Global Alpha. Some highlights:
As you are aware, August was a difficult month for many quantitative hedge funds.Global Alpha was hit particularly hard. While the fund has experienced both challenging and rewarding periods in the past, the dislocation across capital markets during the latter part of August resulted in unprecedented stress to the fund.
On leverage:
We have traditionally viewed leverage as a means of achieving our target volatility.
We are now giving greater consideration to leverage as a separate risk factor in constructing our portfolios and we are applying new leverage constraints….. These changes may result in us maintaining at times a lower volatility than the historical long-term target of 17%.
On “agility”:
There is more money invested in quantitative strategies than we and many others appreciated…..Our intent under these circumstances is to more aggressively limit the size of our fund to reflect this new environment and to increase our agility in times of market stress.
But above all remember:
The quantitative investment space has historically been rewarding for investors, and we believe investment opportunities remain attractive.