Goldman Sachs is injecting $2 billion into one of its struggling hedge funds, underscoring the intensity of the turmoil in credit markets and its potential reach into the U.S. economy, The Washington Post reports.
The fund shed about 30 percent of its value in last week’s trading, shrinking to $3.6 billion from about $5 billion in a matter of days. Goldman’s Global Equity Opportunities Fund is the latest hedge fund to acknowledge big losses in recent weeks as problems in the mortgage industry spread to other parts of the credit market and to stocks.
Problems with tightening credit have been plaguing financial institutions around the globe, prompting central banks in the United States, Europe and Asia to pump billions of dollars into the financial system to keep it operating smoothly.
“This investment reflects our collective belief that the value of this fund is suffering from a market dislocation that does not reflect a fundamental value of the fund’s positions,” says David Viniar, chief financial officer of Goldman.