Goldman Closes Quant Hedge Fund; Litterman Retires

Ahead of President Obama’s call to limit proprietary trading at banks, quantitative hedge-fund group chairman retires.

(January 26, 2010) — Goldman has shut down its Global Equity Opportunities hedge fund, which closed at $200 million, compared to its peak of more than $6 billion.


The fund is a subgroup of the quantitative hedge fund, which is losing its chairman. Robert Litterman, chairman of Goldman Sachs Group Inc.’s quantitative hedge fund group, is retiring at the end of the month – a departure ahead of President Barack Obama’s recent call regulating what the nation’s largest banks can do with depositors’ money.Golman said Litterman’s departure is unrelated to the closing of the Global Equity Opportunities fund.


During his 23 years with Goldman, Litterman advised the quantitative hedge fund unit that ran Global Equities Opportunities, and he was previously head of Goldman’s risk department. Additionally at Goldman, he co-founded with economist Fischer Black, who died in 1995, the Black-Litterman mathematical model for portfolio allocation in 1990. He worked previously with the Federal Reserve Bank of Minneapolis and with the Massachusetts Institute of Technology as an assistant professor in the economic department.


President Obama recently announced that he supports a plan to prevent banks from “owning, investing in or sponsoring” hedge funds and private equity funds. “If financial firms want to trade for profit, that’s something they’re free to do,” he said in the press conference last week. “Indeed, doing so –- responsibly –- is a good thing for the markets and the economy. But these firms should not be allowed to run these hedge funds and private equities funds while running a bank backed by the American people.”


Nevertheless, Goldman Sachs regularly invests in hedge funds that it manages, and the firm’s closing of the Global Equity Opportunities fund doesn’t reflect a departure from hedge fund investing. According to the Wall Street Journal, Goldman said that of its $871 billion of assets under management, $146 billion is from alternative investments, including hedge funds and funds of hedge funds run by its quantitative team.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742