Goldman Sachs Group has enlisted the help of a group of investors that includes insurance executive Maurice “Hank” Greenberg to put $3 billion into one of its hedge funds that has been losing value.
Goldman Sachs acknowledged that its Global Equity Opportunities fund recently “suffered significantly” due to sell-offs on concerns over debt and credit.
Goldman Sachs itself will lead the group of investors to help bail out the hedge fund and said that it will be joined by Eli Broad, Greenberg’s C.V. Starr & Co., and Perry Capital LLC.
Goldman Sachs said that many funds similiar to its own that employ quantitative strategies are currently under pressure as recent conditions have resulted in significant market dislocation. “Across most sectors, there has been an increase in overlapping trades, a surge in volatility and an increase in correlations. These factors have combined to challenge many of the trading algorithms used in quantitative strategies. We believe the current values that the market is assigning to the assets underlying various funds represent a discount that is not supported by the fundamentals,” the firm said.
The fund had a net asset value of approximately $3.6 billion before the equity investment.
The firm said that in addition to the new investors, existing investors in the fund will also have the opportunity to participate.
“The investment will also provide the fund with more flexibility to take advantage of the opportunities we believe exist in current market condition,” the firm said in a statement.
Source: Goldman Sachs
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