On Apr 2, Bloomberg reported that Goldman Sachs Group Inc. (GS) has purchased a minority stake in Level Global Investors LP, a $4 billion New York-based global hedge fund founded and owned by David Ganek.
Through this acquisition, Goldman has added a hedge fund that can lay a wager on rising as well as falling stock prices globally. Given the current market volatility, this approach is highly risky but also a high-return-seeking initiative for the company.
Goldman has completed the acquisition through its Petershill Fund Offshore LP, which is a $1 billion fund set up to buy minority stakes in hedge funds. However, Petershill will not be involved in any kind of decision-making in Level Global since the stake there is a minor one.
Although details and value of the deal remain undisclosed, reports estimate that Goldman has acquired a stake of around 10-20% in Level Global as Goldman’s Petershill is known for picking minority stakes in the this range in other hedge funds such as Capula Investment Management LLP, Winton Capital Management Ltd., Trafalgar Asset Managers Ltd. as well as Shumway Capital Partners LLC.
The acquisition is expected to be helpful to Level Global as its management aims to use the net proceeds of the sale to maintain as well as increase its professionals. Currently, the firm has 64 personnel in all, including 25 investment professionals.
We believe that Goldman has performed better than market expectations and survived the financial crisis. The company has also benefited from its low exposure to toxic mortgage-backed securities and increased client activity.
Although the returns on these hedge funds investment remain uncertain due to the ongoing market volatility, the company is poised to grow significantly with its well-diversified business model and a more conducive operating environment.
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