Goldman to put $3B in ailing fund
Wall Street bank calls battered Global Equity Opportunities fund an 'attractive investment opportunity.'
NEW YORK (CNNMoney.com) -- Goldman Sachs Monday acknowledged recent problems with its quantitative, or computer-driven funds, saying it planned to invest an additional $3 billion with the help of several outsiders.
The investment bank defended its decision to invest in its Global Equity Opportunities fund, stating that it was an "attractive investment opportunity."
During a conference call Monday morning Goldman Chief Financial Officer David Viniar said the Global Equity fund has fallen "in the low 30s" in percentage terms this year, Reuters reported. "It was all last week," he said.
The news agency said Goldman insisted the Global Equity cash infusion was not a bailout, but was rather a move giving the fund new cash needed to buy stocks where valuations are "way out of whack," Viniar said, according to the news agency.
"This is not a rescue. Given the dislocation, we saw a good investment opportunity for us and other investors," he was quoted as saying.
he move, along with the bank's bullish comments on stocks, sent Goldman (down $1.28 to $179.22, Charts, Fortune 500) shares up as much as nearly 1 percent in midday trade and helped sparked a modest rebound in the broader U.S. stock market.
Goldman also acknowledged a report published last week by the Wall Street Journal about the woes of its Global Alpha and its North American Equity Opportunities (NAEO) hedge funds, but said it was hopeful about the future performance.
"At their current levels of equity capital, we believe the funds are positioned to actively pursue market opportunities," the company said in a statement.
Global Alpha is down 16 percent for the year, while North American Equity Opportunities was down more than 15 percent through July 27, the paper reported.
Quantitative, or "quant" funds, which rely on algorithm-driven computer programs to execute trades, have suffered big losses amid the stock market's recently volatility.
Among those firms partnering with Goldman Sachs to invest in its Global Equity Opportunities fund are Perry Capital, Eli Broad and C.V. Starr & Co. Inc., an investment firm led by Maurice "Hank" Greenberg, the former CEO of insurance giant AIG.
Shares of Goldman are down 22 percent from its 52-week high in May. The company competes with JPMorgan Chase (Charts, Fortune 500), Merrill Lynch (Charts, Fortune 500) and Morgan Stanley (Charts, Fortune 500).