Less than three years after engineering a $3 billion emergency bailout of its Goldman Sachs Global Equity Opportunities Fund, Goldman Sachs Asset Management has shut it down.
Once a $7 billion fund, the quantitative equity vehicle had declined to around $200 million under management since its performance fell 30% during the massive quant meltdown of 2007. After starting 2008 with a rebound, it ran up a modest loss in 2009.
Goldman shut down a related fund, Goldman Sachs North American Equity Opportunities Fund, in late 2007, but it supported GEO, as Global Equity Opportunities was known, in August of that year with its own cash as well as that of such outside investors as Richard Perry’s Perry Capital and Maurice “Hank” Greenberg, the former chairman of American International Group.
GEO’s troubles in 2009 came as Goldman’s Global Alpha Fund blew through the macro indices to produce a full-year net return of about 27%.
The gain brought Global Alpha much of the way back to clearing its high-water mark for all of its assets after a devastating 39.8% drop in 2007. As of the end of September 2009, the last date for which figures are available, the fund ran about $2 billion, down from a peak of roughly $11.5 billion in mid-2006.
The closure of GEO, effective at year-end, also came amid a number of personnel changes in Goldman’s quantitative strategies group.
At yearend, Chairman Bob Litterman retired. Bob Jones, founder of the firm’s quantitative equities effort and most recently co-CIO of quantitative equities, became an advisory director to the group.
Importantly, those changes followed the retirement in April of Mark Carhart and Ray Iwanowksi, the group’s long-time coheads, as well as former research co-chief Giorgio De Santis. Carhart is now setting up his own new hedge fund operation; Litterman and De Santis are said to be joining him.
Katinka Domotorffy, head of the quant group since April, is continuing in her role, as is Kent Daniel, co-cio for equities, Bill Fallon, co-cio for macro and fixed income, and Tom Teles, head of mortgage strategies.
As for Global Alpha, its managers overhauled the way the fund was run even before 2007 was out, reducing risk by putting limits on leverage, adding new factors to the menu of buy and sell indictors, and most importantly, adding a new mechanism called a “financial distress indicator” that was aimed at avoiding the kind of rapid, systemic deleveraging that occurred in the summer of that year.
One investor attributed the fund’s nearly 30% performance in 2009— multiples of the 6.76% average for macro funds tracked by AR—in partly to its ability to begin putting on risk in the first quarter, when others were still largely avoiding it after 2008’s debacle.
--Sarah Wood