For years, Goldman Sachs Group Inc.'s flagship Global Alpha hedge fund could do no wrong. Over the past year, it has been able to do almost nothing right.
August was the worst month in the fund's 12-year history; it was down 22.7% last month alone, according to a recent letter to investors. So far this year through the end of August, it was down 33.4% due to bad bets on everything from the Australian dollar, the Norwegian stock market and Japanese government bonds. The letter gave no indication about how the fund was faring this month. Over the past 12 months, the fund has lost 37% of its value.
That performance is a tough pill for Goldman and the two University of Chicago alumni, Mark Carhart and Ray Iwanowski, who run the fund. The pair had garnered accolades -- and made Goldman the envy of other Wall Street firms -- when Global Alpha was one of the best performing of the hedge funds set up by Wall Street investment banks. Mr. Carhart, an avid cyclist, and Mr. Iwanowski were among Goldman's highest-paid executives in recent years.
This is on top of a 9% decline in 2006 so an investor who entered in 2006 is now down 40%+ and would need the fund to return 70%+ just get to par. Tough slogging for the premier fund of the premier investment bank.