Goldman Closes Quant Hedge Fund; Litterman Retires

(January 26, 2010) — Goldman has shut down its Global Equity Opportunities hedge fund, which closed at $200 million, compared to its peak of more than $6 billion.

The fund is a subgroup of the quantitative hedge fund, which is losing its chairman. Robert Litterman, chairman of Goldman Sachs Group Inc.’s quantitative hedge fund group, is retiring at the end of the month – a departure ahead of President Barack Obama’s recent call regulating what the nation’s largest banks can do with depositors’ money.Golman said Litterman’s departure is unrelated to the closing of the Global Equity Opportunities fund.

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During his 23 years with Goldman, Litterman advised the quantitative hedge fund unit that ran Global Equities Opportunities, and he was previously head of Goldman’s risk department. Additionally at Goldman, he co-founded with economist Fischer Black, who died in 1995, the Black-Litterman mathematical model for portfolio allocation in 1990. He worked previously with the Federal Reserve Bank of Minneapolis and with the Massachusetts Institute of Technology as an assistant professor in the economic department.

President Obama recently announced that he supports a plan to prevent banks from “owning, investing in or sponsoring” hedge funds and private equity funds. “If financial firms want to trade for profit, that’s something they’re free to do,” he said in the press conference last week. “Indeed, doing so –- responsibly –- is a good thing for the markets and the economy. But these firms should not be allowed to run these hedge funds and private equities funds while running a bank backed by the American people.”

Nevertheless, Goldman Sachs regularly invests in hedge funds that it manages, and the firm’s closing of the Global Equity Opportunities fund doesn’t reflect a departure from hedge fund investing. According to the Wall Street Journal, Goldman said that of its $871 billion of assets under management, $146 billion is from alternative investments, including hedge funds and funds of hedge funds run by its quantitative team.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

(January 25, 2010) — Transparency and liquidity risk have overtaken poor performance as the top concerns for institutional investors investing in hedge funds, according to a global survey by SEI and Greenwich Associates.

The survey, titled “The Era of the Investor: New Rules of Institutional Hedge Fund Investing,” reveals that diversification remains the primary reason to invest in hedge funds. The survey showed nearly all of the institutional investors who responded this year said they would either increase or maintain hedge fund allocations over the rest of 2010. Additionally, transparency rose in importance this year, with more than 70% of respondents saying they now request “more detailed information from managers than they did a year ago.”

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“Investors remain committed to hedge funds but that commitment comes with increased expectations,” said Phil Masterson, Managing Director for SEI’s Investment Manager Services division in a news release. “The balance of power has clearly shifted and managers must meet the growing demand for transparency and increase their focus on operational effectiveness if they want to be successful in this ‘Era of the Investor.'”

The survey was conducted in November 2009 by the SEI Knowledge Partnership in collaboration with Greenwich Associates. Participating organizations ranged in size from less than $500 million to more than $20 billion in assets. More than half of they survey’s respondents represented foundations or endowment funds, 23% corporate funds, 19% public or government funds, and 2% Taft Hartley funds. Eighty-three percent of respondents were based in the US, with the remainder in the United Kingdom and continental Europe.

SEI administers $383 billion in mutual fund and pooled assets and manages $156 billion in assets.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742