Goldman Sachs announces $3 billion infusion in global fund hurt by market dislocation

By Jennifer Lanning Drey

Portland, Ore., Aug. 13 - Goldman Sachs Group, Inc. announced a $3 billion equity infusion in its Global Equity Opportunities (GEO) fund, an action chief financial officer David Brennan defended as "not a rescue" effort for the equity long/short quantitative strategy fund that has suffered significantly due to the recent market dislocation.

"This investment represents our collective belief that the value of this fund is suffering from a market dislocation that does not reflect the fundamental value of the fund's positions," Brennan said during a conference call held Monday.

Goldman Sachs is making the investment along with various other investors including C.V. Starr & Co., Inc., Perry Capital LLC and Eli Broad.

"Over the past few weeks, the volatility in global markets has hurt the performance of many quantitative equity strategies. In response, we've been reducing risk and leverage in GEO. Unfortunately, the recent simultaneous global unwinding of portfolios utilized in quantitative investment strategies has exacerbated GEO's performance challenges," Brennan said.

GEO's existing investors will also have the opportunity to participate in the equity infusion.

"The developments of the last few days have been unprecedented and characterized by remarkable speed and intensity across global markets. But markets, by their nature, are cyclical. We've seen market dislocations in the past and as painful as they may be at the time, know they present important opportunities in the longer term," Brennan said.

GEO had a net asset value of about $3.6 billion before the equity investment.

Rumors dispelled

Brennan also took time during Monday' s call to address what he called speculation regarding a possible unwinding of the Global Alpha and the North American Equity Opportunities (NAEO) funds, which are both managed by Goldman.

"We are not unwinding Global Alpha or NAEO. We have reduced risk and leverage in both of these funds and think they are positioned to execute on their investing strategies," he said.

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