Sydney Morning Herald – FOR Global Alpha, the $US10 billion ($US12.8 billion) hedge fund run by Goldman Sachs, 2005 was a stellar year. By the close of the year, the fund, which manages money for some of the firm’s wealthiest clients and employees, was up 40 per cent after fees, a performance that helped contribute almost $US600 million to Goldman’s 2006 first-quarter earnings.
This year has been different.
To December 1, Global Alpha was down almost 11 per cent. The average fund in Global Alpha’s style of investing, known as equity-market neutral (meaning its returns should not be similar to those of the stockmarket), is up 5.8 per cent for the year, according to Hedge Fund Research of Chicago. By comparison, the Standard & Poor’s 500-stock index was up 12 per cent to December.
For hedge fund investors, 2006 has been a year when many fears were realised. A $US9 billion blue-chip hedge fund collapsed in the space of a week and Goldman’s woes revealed a painful truth of investing in these secretive, lightly regulated, high-fee investments: hedge-fund investing is hard, and no one – not even Goldman Sachs – is infallible.
