Goldman Sachs has led a $3 billion bailout of one of its own hedge funds after market turbulence lost it almost half its value - much of it in the last week.Goldman Sachs will supply $2 billion to the Global Equity Opportunities fund (GEO), which lost $1.5 billion when its automated quantitative long-short strategy failed to cope with market turbulence recently. The rest of the bailout comes from investors including Eli Broad, the billionaire founder of SunAmerica, and the hedge fund Perry Capital.
Goldman said the recent unwinding of other quant funds had "exacerbated the challenges" of managing the GEO fund. Market deleveraging is now more than 75% complete, it said. Going forward, the fund would continue to operate at 3.5 times leverage, down from six times before the investment.
Goldman chief financial officer David Viniar commented: "Given the dislocation in the markets, we believe this is a good investment opportunity for us and the other investors we have brought in." He added: "There are a lot of assets now trading at distressed prices that are not distressed. This is one of them."
Topics: Goldman Sachs
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