MarketSaga

Saga of Financial Markets

Tue01162018

Last updateSat, 29 Jul 2017 12am

Back You are here: Home Funds Funds Update Alternative Goldman Sachs Global Alpha Fund

Goldman Sachs Global Alpha Fund

Goldman Sachs's flagship Global Alpha fund is slowly recovering from its dismal performance in 2007, when it lost 40% of its value.

The computer-driven Alpha fund is up 20% so far this year after two years of under-performance. However, the year's rise is based on a drastically reduced pool of money. At its peak, Global Alpha had $12.5bn under management, but the fund now has less than $3bn.

Goldman Sachs New World Headquarters

Goldman Sachs New World Headquarters (Photo credit: Wikipedia)

The losses at Global Alpha were especially high-profile because many senior Goldman executives and former executives had put their own money into the fund, alongside some of Goldman's wealthiest clients.

Robert Litterman, a Managing Director for quantitative resources at Goldman Sachs Asset Management, blamed the fund's poor performance last year on an excessive amount of hedge fund money that was being traded according to mathematical models.

Because all the "quant-driven" hedge funds use similar computer programs to determine which companies to focus on - and even use the same signals to determine when to buy and when to sell - the market became crowded and one-sided.

Mr Litterman described the most turbulent days, which came at the end of last July, as a 'five standard deviation event', or one that would have been almost impossible to anticipate.