Goldman's Global Alpha May End 2007 Down $6 Billion

Goldman Sachs Group Inc.'s Global Alpha hedge fund may lose about $6 billion in assets this year, a 60 percent decline, because of trades that went awry and client withdrawals, according to two investors.

Global Alpha, which entered 2007 with more than $10 billion, lost 37 percent on investments through Nov. 14, most of it in August, said the Goldman clients, who asked not to be identified because the fund's performance is private. The New York-based company has about $2 billion in fourth-quarter redemption notices, on top of withdrawals through the year.

Goldman, the world's most profitable securities firm, said last month it won't shut down Global Alpha, a quantitative fund whose managers, Mark Carhart and Raymond Iwanowski, use computer models to select trades. The fund generated $700 million in fees in 2006, after returning almost 40 percent the previous year.

Goldman as a firm would like not to have the reputation of shutting things down, said Geoffrey Bobroff, an independent investment consultant in East Greenwich, Rhode Island. Smaller isn't necessarily bad.

Christopher Williams, a Goldman spokesman, declined to comment.

Global Alpha fell 22.5 percent in August, hurt by wrong-way stock and currency bets. Other Goldman quant funds lost money that month, including the $7.5 billion Global Equity Opportunities, which declined 23 percent.

Goldman pumped $2 billion of its own money into Global Equity in the middle of the month and raised an additional $1 billion from investors such as billionaires Eli Broad and Maurice Hank Greenberg, former chairman of American International Group Inc.

Source - Bloomberg