Times Online- Goldman Sachs is understood to have made a profit of $370 million (£181 million) from the rescue last month of its imploding “black box†hedge fund Global Equity Opportunities.
Goldman injected $2 billion of new equity into the highly geared quantitative fund after its computer-driven share-picking strategy led to huge losses in mid-August.
At the time outside investors lost 32 per cent of their money and the fund was faced with a fire sale of assets to repay debt, which would have led to even steeper losses.
Instead, Goldman orchestrated a rescue injection of $3 billion, contributing $2 billion itself. Hank Greenberg, the former head of AIG, the insurance group, and Eli Broad, the property billionaire, chipped in the other $1 billion. Existing investors were also invited to invest fresh money on the same terms.
At the time Goldman called the rescue a good investment opportunity, but it was also seen as a way of staving off a damaging blow to its reputation. The image of Bear Stearns, a rival securities house, was badly damaged when two of its hedge funds investing in sub-prime mortgage assets collapsed.
The subsequent recovery in GEO has produced instant profits for Goldman and its rescue partners. However, some of the other investors in the fund remain in the red, although their losses, it could be argued, would have been greater had it not been for the Goldman intervention.
