Goldman Sachs hedge fund gets $3 billion bailout

ByABC News
August 13, 2007, 5:16 PM

NEW YORK -- The investment bank said its Global Equity Opportunities fund "suffered significantly" as global markets sold off on worries about debt and credit. The fund lost as much as 14% of its value during the past 12 months, according to media reports, and is currently worth about $3.6 billion.

Goldman Sachs will lead the group of investors to help bail out the hedge fund, which relies on computer-driven trading strategies. Other investors include Broad, Greenberg's C.V. Starr, and Perry Capital.

In addition, the investment bank said that two other hedge funds it manages Global Alpha and the North American Equities Opportunities Fund have also suffered during the market dislocation. Goldman said it "reduced risk and leverage" in the funds to stem losses.

"At their current levels of equity capital, we believe the funds are positioned to actively pursue market opportunities," Goldman said in a statement.

Bear Stearns earlier this summer disclosed that two of its multibillion dollar hedge funds were wiped out because of heavy bets on mortgage-backed securities. BNP Paribas said last week it would freeze three funds invested in U.S. asset-backed securities.

Quantitative funds like Goldman Sachs' that rely on computer models to make investments have taken a beating because of triple-digit swings on Wall Street during the past few weeks. Other financial institutions are also expected to reveal to what extent their funds have suffered as well.