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Macro fund performance: Goldman Sachs’s Global Alpha trips – but will it fall?

Macro fund on losing streak; incentive fees down 88% in February quarter.

Is it time to get worried about Goldman Sachs’s Global Alpha fund? The question is on the lips of many hedge fund industry participants. The $10 billion fund has been losing money for more than a year, and the impact of this on fees is well demonstrated in the firm’s first-quarter results. Net revenues generated from incentive (performance) fees for the asset management and securities services business of Goldman Sachs were just $90 million in the three months ending February 23, 2007. That compares with $739 million for the quarter ending February 24 2006. The significant fall, say analysts, was a direct result of the poor performance of the Global Alpha fund.

Over 2006, the fund, which employs a global macro strategy, lost about 9%. HFRI’s macro index, which is considered the benchmark for global macro hedge funds’ performance, returned 8.15% over 2006, and the average performance of all hedge funds tracked by HFRI was 12.89%. In the first two months of 2007, the Global Alpha fund continued to lose money, posting a loss of 2%. Again, the HFRI macro index was up, around 0.75%, for the same period.

In a monthly investor letter in February, this year’s losses were attributed to bets that the Norwegian krone and Japanese yen would fall in value.

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