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Goldman leads $3bn fund bail-out | Goldman leads $3bn fund bail-out |
(about 4 hours later) | |
Investment bank Goldman Sachs is leading a group of investors in spending $3bn (£1.49bn) to bail out a hedge fund after recent market turmoil. | Investment bank Goldman Sachs is leading a group of investors in spending $3bn (£1.49bn) to bail out a hedge fund after recent market turmoil. |
The firm said the performance of its Global Equity Opportunities fund had "suffered significantly". | The firm said the performance of its Global Equity Opportunities fund had "suffered significantly". |
Other investors pumping money into the fund include CV Starr and Eli Broad. | Other investors pumping money into the fund include CV Starr and Eli Broad. |
World stocks slumped last week on fears that a rise in mortgage defaults would prompt a wider crisis. Other companies have also bailed out hard-hit funds. | World stocks slumped last week on fears that a rise in mortgage defaults would prompt a wider crisis. Other companies have also bailed out hard-hit funds. |
Credit crunch | Credit crunch |
"The investment will also provide the fund with more flexibility to take advantage of the opportunities we believe exist in current market conditions," said Goldman Sachs. | "The investment will also provide the fund with more flexibility to take advantage of the opportunities we believe exist in current market conditions," said Goldman Sachs. |
But David Viniar, chief financial officer at the group, said the move was "not a rescue". | But David Viniar, chief financial officer at the group, said the move was "not a rescue". |
Goldman said two other firms that it manages - North American Equity Opportunities Fund and Global Alpha - have also experienced problems recently. | Goldman said two other firms that it manages - North American Equity Opportunities Fund and Global Alpha - have also experienced problems recently. |
Market volatility developed in recent weeks as finance firms began to discover the degree to which they were exposed to the sub-prime sector, which specialises in lending to high-risk individuals with poor credit, by charging high interest rates. | Market volatility developed in recent weeks as finance firms began to discover the degree to which they were exposed to the sub-prime sector, which specialises in lending to high-risk individuals with poor credit, by charging high interest rates. |
As more banks have closed or frozen funds this has affected the supply of money in the market, raising fears over a looming credit crunch. | As more banks have closed or frozen funds this has affected the supply of money in the market, raising fears over a looming credit crunch. |
The situation has prompted private equity firm KKR to say that its financing of deals - such as the buyout of Alliance Boots - would be more costly than it had anticipated. | |
This may "adversely affect our results of operations and financial condition," the company said in the filing. | |
Since Thursday central banks in Europe, Japan and the US have injected billions of dollars in a bid to inject cash into the banking system. | Since Thursday central banks in Europe, Japan and the US have injected billions of dollars in a bid to inject cash into the banking system. |
In June, Bear Stearns injected $1.6bn to bail out two hedge funds, later saying they were worth "very little". | In June, Bear Stearns injected $1.6bn to bail out two hedge funds, later saying they were worth "very little". |
Hedge funds, which use investments from rich individuals in complex transactions, have seen their performance deteriorate in the wake of the recent share sell-off. | Hedge funds, which use investments from rich individuals in complex transactions, have seen their performance deteriorate in the wake of the recent share sell-off. |
Globally hedge funds are estimated to be worth some $2 trillion. | Globally hedge funds are estimated to be worth some $2 trillion. |
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