STUCK INSIDE A 'BLACK BOX'- HEDGIES IN A WORLD OF HURT
By RODDY BOYD
August 10, 2007 -- First it was the mortgage bond funds that fell, and now the credit-market crunch is claiming victims in the highly sophisticated arena of so-called "black box" funds.
The wounded include some of the most impressive names in the hedge fund universe, including Goldman Sachs, JPMorgan and AQR Capital Management, whose plan to go public could be affected by its recent performance stumbles.
Officially referred to as statistical arbitrage hedge funds, these entities deploy proprietary mathematical formulas to take advantage of small price discrepancies in stocks.
AQR Capital Management, a $35 billion hedge fund in Greenwich, Conn., that uses a variety of quantitative trading strategies, suffered more than a 6 percent loss in its primary Market Neutral fund this month, though it remains up 1 percent year to date. Its smaller Stock Selection fund is down 9 percent through the first week of August, The Post has learned.
Founded by Goldman Sachs' ex-quantitative research chief Clifford Asness, the fund has said it would soon be filing papers for an initial public offering.
Meanwhile, a publicly traded hedge fund of JPMorgan's Highbridge Capital Management unit dropped 5.3 percent this month and is down 3.3 percent for the year.
The $1.8 billion Highbridge Statistical Market Neutral Fund has suffered alongside other statistical arbitrage funds as the credit markets collapse has led to massive stock volatility that apparently was not taken into account by its complex trading algorithms.
Two Goldman Sachs hedge funds are hurting as well. The much-watched $9 billion Global Alpha hedge fund has dropped 16 percent** for the year, with 12 percent of that loss coming in the last two weeks of July.
**Goldman's Global Alpha Hedge Fund Falls 26% in 2007, People Say
By Katherine Burton and Jenny Strasburg
Aug. 10 (Bloomberg) -- Goldman Sachs Group Inc.'s $8 billion Global Alpha hedge fund has fallen 26 percent so far this year, according to people familiar with the fund.
This year's drop in the fund, managed by Mark Carhart and Raymond Iwanowski, follows the loss of about 9 percent in 2006, said the people, who declined to be named because the fund is private. Global Alpha's performance has reduced the fees paid to New York-based Goldman. Spokesman Peter Rose declined to comment.
The smaller North American Equity Opportunities fund dropped 11 percent in July alone and is down 23 percent for the year.
A Goldman executive said the $767 million fund is remaining open and has been selling some of its positions over the past several trading sessions.
Tykhe Capital, a $1.8 billion hedge fund founded by alumni of D.E. Shaw, one of the original quantitative trading hedge funds, was reported to have dropped 20 percent in the first week of August, according to The Wall Street Journal. |
