Computer-driven algorithms are dethroning external money managers at a Goldman Sachs Group Inc. alternative mutual fund that’s seeking to slash fees and rebuild its dwindling assets.
(Bloomberg) — Computer-driven algorithms are dethroning external money managers at a Goldman Sachs Group Inc. alternative mutual fund that’s seeking to slash fees and rebuild its dwindling assets.
The quantitative investment strategies team will run the bank’s Multi-Manager Alternatives Fund as of September, according to a recent filing. It will replace members of Goldman’s alternative investments and manager selection group — now known as External Investment Group — which helped the fund allocate its capital among 11 outside firms as of March.
Goldman Multi-Manager’s assets have languished in recent years as investors pulled back from liquid alternative funds that make hedge fund-like strategies available to small investors. Shifting to proprietary computer algorithms will eliminate the cost of paying outside managers, allowing the fund to lower its annual management fee to 0.75% from 1.90% — potentially positioning it to regain investors.
“These changes provide investors with more competitive fees while still allowing them to benefit from exposure to a diversified range of alternative investment strategies,” Goldman said in an emailed statement. “The repositioning will bring more efficiency to the fund management, reflected in a significantly lower contractual management fee.”
The fund will also change its name to Goldman Sachs Multi-Strategy Alternatives Fund.
Asset Outflows
Liquid alternative funds regained some popularity in 2022, only to see about $7.6 billion in asset outflows this year through May, according to Simon Scott, director of alternative ratings at Morningstar Inc. The Goldman fund’s assets total about $138 million, down from a high of almost $1.8 billion in 2015.
The Goldman fund employed outside firms including Brigade Capital Management, Marathon Asset Management and Artisan Partners, according to the fund’s website. Because the fund shifts money among alternative strategies as market conditions change, some of these firms might not always have an allocation.
Brigade declined to comment. Marathon and Artisan didn’t return calls seeking comment.
Oliver Bunn, the head of Goldman’s QIS alternatives team, will take over as portfolio manager, replacing Betsy Gorton, Peter Seok and Jennifer Stack. All three work in Goldman’s External Investment Group, which allocates to about 300 equity and fixed-income strategies and provides ratings on more than 800 strategies for the bank’s advisory businesses.
The fund will continue to invest in a range of traditional and non-traditional alternative investment strategies, according to the filing, such as event-driven, tactical, relative value and opportunistic fixed-income investing.
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