NEW YORK ― Goldman Sachs Group Inc. posted a wider-than-expected loss of $428 million for the third quarter, only its second quarterly loss as a public company, hurt by sharp declines in the value of investment securities and customer trading assets.
Chief Executive Lloyd Blankfein cited difficult market conditions and a lack of confidence among investors and corporate clients for the poor results.
“Our results were significantly impacted by the environment and we were disappointed to record a loss in the quarter,” Blankfein said.
Shares of the largest U.S. investment bank by assets were down 2 percent in premarket trading.
Goldman’s loss-driver was its Investing & Lending division, which holds stocks, bonds, loans and private equity assets as long-term investments.
The division reported negative revenue of $2.48 billion as the value of those assets dropped sharply. Goldman’s stock investment in Industrial and Commercial Bank of China Ltd alone generated more than $1 billion of paper losses.
Goldman was also hurt by big declines in bond trading and investment banking revenue.
Its fixed income, currency and commodities client trading business reported $1.73 billion in revenue, a 36 percent decline from a year earlier. Investment banking revenue dropped 33 percent to $781 million.
NEW YORK ― Goldman Sachs Group Inc is shuttering a well-known hedge fund that relies on computer-driven trading strategies after the portfolio rang up a hefty loss this year.
Goldman told investors in the roughly $1.6 billion Global Alpha fund the news on Thursday, one day after it announced a management shake-up at the fund that had been the crown jewel of its quantitative trading business. The fund will be closed in the next few weeks.
Global Alpha had tumbled 13 percent by early September, delivering a far worse performance than other hedge funds that rely on computer programs to quickly take advantage of opportunities in the market, people familiar with the number said. These types of funds are supposed to move quickly in and out of stocks, bonds, currencies and other assets and exit positions before losses accrue.
This is the second time in four years the Global Alpha fund — once one of Goldman’s biggest with $12 billion in assets — has suffered big losses and its performance raises questions about the ability of Goldman Sachs to manage quantitative strategies for its wealthy clients.
In fact, people familiar with Goldman Sachs have said the company’s decision to liquidate Global Alpha signals its decision to exit quantitative hedge fund strategies altogether. The firm still manages billions in quantitative mutual funds.
Goldman Sachs declined to comment.
Even though Goldman’s Global Alpha fund is in the red, most other quantitative hedge funds are up or are flat for the year. The average quant fund is down less than 1 percent over that period, according to performance tracking service Hedge Fund Research Inc.
Mark Carhart, the man who managed the Global Alpha fund with Raymond Iwanowski for more than a decade until 2009, has gained 7 percent net of fees this year at his new hedge fund Kepos Capital, a person familiar with his numbers said.
The new turmoil at Global Alpha comes almost four years to the day after the fund lost 22.5 percent in August 2007, during the early days of the financial crisis. Those losses prompted investors to pull money out.