Goldsman Sachs flagship hedge fund loses money, despite hiring 17 Amaranth advisors

Hedge fund drops 3.4% despite hirings Shanny Basar
30 May 2007 updated at 16:13

Goldman Sachs’ flagship hedge fund has continued to lose money despite the bank trying to bolster its team by hiring 17 staff from Amaranth Advisors, a US hedge fund manager that collapsed last year.

The bank’s $10bn (€7.4bn) Global Alpha hedge fund fell 3.4% in the first four months of this year, according to Bloomberg which cited a letter sent to investors last week, although it gained 0.4% last month. In contrast the Credit Suisse/ Tremont Hedge Fund Index returned 5.4% in the first four months of this year.

The fund had made bets that currencies, including the Canadian dollar and Norwegian krone, would decline, but they increased, and it suffered from market-neutral investments in the fixed-income and equity markets.

Global Alpha managers said in the letter cited by Bloomberg that the equity market-neutral strategy “detracted from performance as our earnings quality and valuation themes performed poorly”.

The same fund reported a loss of 9% in 2006 after it gained almost 40% in 2005 and at the end of last year the bank hired 17 staff from Amaranth Advisors, a US hedge fund manager that collapsed in September.

Amaranth, which started last September with assets under management valued at $9.5bn, saw 70% of its funds wiped out in two weeks after the market moved against its trades in the natural gas market.

Goldman was also overtaken by JP Morgan in a recent survey of the largest global hedge fund managers in Alpha magazine. JP Morgan moved to number one with $33bn in total capital as of December 31, according to the survey, while Goldman Sachs moved down to the number two slot with $32.5bn in assets.

Goldman Sachs declined to comment.

http://www.financialnews-us.com/index.cfm?page=ushome&contentid=2447923239

 

I'm trying to figure out why they wrote despite

 

I'm not even reading the article. The headline is golden and reading the actual article may make it less humorous. Thanks.

 

Global Alpha returned more than 80% in 2003 and more than 40% in 2005. It's been annualising in the region of 25% since inception in 1996.
It is a quant RV programme inspired by Bob Litterman's models.


The Amaranth team that Goldman recruited does not work for the Global Alpha fund. It is a separate hedge fund run within Goldman Sachs Asset Management.

Once again, jealousy generates misinformation. Vultures feed on it.

 

@Alexandre Interesting post. Thanks. Too much anti-HF chatter on this board inspired by lack of information/understanding or even - as you said - jealously.

 

greed will kill us all.

 

At first when I read this, my initial thought was, a large-scale bagholder fro GS to dump off positions to, and to also bet against. That may yet prove itself to be true.

Then, I thought, perhaps they are positioning early, and lewaning against this bull run, which may explain soem of the losses, if not all of them.

Now, it seems the variables to include in the process are that there also the presence of a 'roving demolition team', from Amaranth.

I guess the equivalent in the real world, would be to hire the most prolific arsonists to be the Fire Department SuperIntendents for our largest municipalities.

The reasoning could go something like this: 'Let's torch a building, to save the one next to it from the cockroaches inside the first.'

 

It's funny they would hire Amaranth flunkies and expect a different outcome.

I bet they hired the Amaranth guys, and took the opposite side of the trades. GS makes more money than Bernanke with a printing press. Something doesn't smell right.

 

One guy took down Amaranth, and the top brass at the fund let it happen. The other traders had little to do with the debacle.

 

Well, they are doing a bad job of redeeming themselves.