The departure of Mark Carhart and Raymond Iwanowski, the quants who ran Goldman’s Global Alpha hedge fund, has set the rumour mill in motion at Goldman Sachs. Here are a few tidbits we picked up.
- Global Alpha, which suffered horrific losses in the quant blood bath of 2007, didn’t do all that badly in 2008. It was actually up for the year, with its investments growing 3 per cent.
- Nonetheless, Global Alpha had shrunk from $12 billion to $2 billion, which meant that no matter what the returns were, the guys running it were making far less money than they had in the past.
- The consensus within Goldman has now settled on the idea that the TARP bonus restrictions drove out the hedge fund managers.
- If…or when…Carhart and Iwanowski start a new hedge fund, Goldman may be a major investor. In a sense, yesterday’s departures may simply be moving the pair outside the firm where they won’t be subject to TARP restrictions. Goldman has a history of funding the funds started by former employees.
- There is talk within Goldman that one or both of Carhart and Iwanowski may be headed to the buyout firm KKR, where they would manage their own fund. Working within an existing structure would ease some of the back-office start-up costs. This possibility, however much it may be whispered on the trading floors of Goldman, seems to be merely speculation right now.