One of Goldman Sachs‘s flagship hedge funds, run by two of the Wall Street bank’s most talented traders, has lost close to $1bn since its launch in January in further evidence of the crisis facing the industry.
Goldman Sachs Investment Partners, which was hailed in January as one of the biggest hedge fund launches, raising more than $6bn, has told investors that it had lost $989m by September. It said the fund was down about 13 per cent in the third quarter. Year-to-date performance fell about 15.5 per cent in the year to September.
The managers said: “We are disappointed with our performance.” But they added: “GSIP is not alone in producing disappointing returns this quarter and this year.
“We anticipate that these results will lead to net outflows from the hedge fund industry.” Hedge funds have had a horrible year with asset prices in free fall, redemptions at record levels and banks imposing tougher conditions on lending, prompting some managers into fire-sales.
GS Investment Partners, which imposed a two-year lock-in at launch and has a strong bias towards equities, is managed by Raanan Agus and Kenneth Eberts, former heads of proprietary trading desks at Goldman.
The fund was launched after a poor year for the bank’s quantitative, or computer-driven, hedge funds which were hit hard in August 2007 forcing the bank to inject $3bn to rescue its Global Equity Opportunities fund.
More than half of GS Investment Partners’ losses in the third quarter was from its investments in commodities, basic materials, metals, mining, energy and agriculture. But like many multi-strategy funds diversified across equity, credit markets and convertible bonds, GS Investment Partners was hit hard by losses on convertible bonds – debt instruments that can convert into equity. It said returns from the convertible asset class had been “abysmal”.
The Hedge Fund Research convertible bond index showed returns had dipped 20 per cent in the year to September. The falls accelerated sharply in October.
Assets in Citadel’s largest fund, Kensington multi-strategy fund which has about $13bn under management, fell 37 per cent in the year to October 27.
Deephaven Capital Management in the US has told investors that it was suspending withdrawals from its $1.6bn Global Multi-Strategy fund and working on “a plan for the continuation of the fund” after suffering in virtually every market in which it was invested.
By Kate Burgess in London
Published: November 3 2008 23:31 | Last updated: November 3 2008 23:31
Source: Financial Times