In a press release from Monday morning, Goldman Sachs (NYSE: GS ) claimed that "an increase in overlapping trades, a surge in volatility and an increase in correlations" has hurt its Global Equity Opportunities (GEO) hedge fund.
Last week, the big news was that there are a whole mess of hedge funds out there that are sucking wind since global credit markets started freezing up and just generally doing wacky things. The particular type of hedge fund that has reportedly taken the brunt of the beating is the quantitative market-neutral strategy.
This strategy uses wicked smart computer algorithms to sift through tons of market data and pick out good trading opportunities. The market-neutral part of it means that the funds take both long and short positions to minimize exposure to the movement of the overall market. The unexpected and downright weird movements of the market of late -- exacerbated by hedge funds trying to deal with the situation and unwind positions -- have left many of the trading computers wondering which way is up.
The quantitative hedge funds like Goldman's typically don't use quite as much leverage as, say, the Bear Stearns (NYSE: BSC ) funds that went belly-up, so the deterioration isn't as dire. This doesn't mean, though, that fund investors are sleeping well and are happy about what's going on with their money.
The fresh $3 billion going into the fund was presented in the press release as fresh trading opportunities that Goldman sees as opposed to a bailout. Lending credence to Goldman's belief is the fact that CV Starr & Co., Perry Capital, and Eli Broad are joining the firm in the investments. CV Starr is an insurance firm run by Hank Greenberg, of AIG (NYSE: AIG ) fame, while Perry Capital is a nearly 20-year-old hedge fund run by former Goldmanite Richard Perry. Eli Broad is one of the founders of KB Home (NYSE: KBH ) and one of the 50 richest Americans.
It would be great for Goldman, which has experienced some struggles recently with its alternative asset management arm, if the aforementioned opportunities do materialize for its GEO fund. Its two other funds that have been in the news -- Global Alpha and North American Equity Opportunities -- are now struggling (Global Alpha is down 27%), but apparently don't present the same opportunity for additional investment.
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Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. The Fool's disclosure policy has never once been caught with its pants down. Of course, it doesn't actually wear pants.