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Goldman (GS) cuts expenses on poorly performing funds; Time to buy?

Posted Aug 15th 2007 6:45PM by Kevin KellyKevin Kelly RSS Feed
Filed under: Competitive strategy, Goldman Sachs Group (GS), Bargain stocks, Bear Stearns Cos (BSC), Stocks to Buy

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According to a source of Bloomberg, Goldman Sachs (NYSE: GS) is going to cut the expenses and performance fees on its poorly performing hedge funds. The source reported that "new participants won't pay the 2 percent management charge and Goldman will cut its performance fee in half."

This is a very interesting move for a company that claimed the recent $3 billion infusion was capitalizing on an investment opportunity, not a rescue. It would seem like the company is cutting management fees to prevent being forced into further "capitalizing" on this investment opportunity.

In my opinion, this whole debacle is just a bump along the way for Goldman's funds. Goldman Sachs is an incredible fund manager and business (as displayed by the stock's performance since coming public) and I think that, over the long term, funds such as Global Alpha will recover and flourish.

I think the sell-off in Goldman's shares has created a buying opportunity and I reiterate what I said about a month ago here. The fact that this stock has sold off nearly as much as problem-ridden Bear Stearns (NYSE: BSC) simply due to poor hedge fund performance (Bear had two blow-ups) is simply ridiculous.

As you can see from the chart to the right, I've been wrong on this call so far, but hedging with the Vanguard Financials ETF (NYSE: VFH), as I suggested would have reduced your losses.

Tags: Bear Stearns, BearStearns, BSC, Buying Opportunity, BuyingOpportunity, Expense Reduction, ExpenseReduction, Goldman Sachs, GoldmanSachs, GS, VFH

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Last updated: November 10, 2009: 06:39 PM

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