Goldman Sachs Global Alpha Hedge Fund Down 26% in 2007

Is another major quant hedge fund about to bite the bullet?

Several investors in the private fund have told the press that the Global Alpha hedge fund has dropped 26% in value so far in 2007, following up a 9% drop in 2006. As is the case with many quant funds these days, the Global Alpha fund has suffered from the sudden crunch in credit markets. The fact that many quant funds are liquidating equity positions is roiling the markets, which has thrown the computerized models that quant funds run on out of whack, further enhancing the losses that they are taking.

The major question is: can the Global Alpha fund survive this bloodbath? I'd say that is a definite no. In my opinion, no fund can survive a 9% drop followed by a 26% drop, especially a multi-billion dollar quant fund. The fund is going to be rocked by redemptions, and I don't think that there is anything that can be done to regain confidence in the fund.

These redemptions will likely add to the selling pressure that is plaguing the market right now. Quant funds are a mess right now, and it may be a year before things start to calm down substantially.

Filed under: Hedge Fund News | The Economic Meltdown