Technology claims Goldman Sachs MF's arbitrage schemes

Says advent of technology has curtailed arbitrage opportunities

Goldman Sachs Asset Management, the mutual fund arm of the US investment bank, has decided to wind down two of its equity schemes following poor investor response. Goldman Sachs Derivatives Fund and Goldman Sachs Equity and Derivatives Opportunities fund had assets of less than Rs 10 crore between them and were managed by fund managers Gauri Sekaria and Vishal Jain, respectively. The fund house claimed that “the advent of technology in the stock markets” has considerably reduced the time required to take advantage of price anomalies available between the cash and derivatives market. “This has resulted in arbitrage opportunities shrinking drastically over the years. This together with scheme's performance profile has resulted in sharp reduction in demand for both the schemes,” GS AMC said in a notice.

A senior Goldman Sachs official declined comment.

Goldman Sachs managed assets worth Rs 4,785 crore during the quarter ended December 2012. Bulk of these assets came from the company’s from passive schemes such as exchange traded funds and index funds. GS Gold Exchange traded scheme accounted for over two thirds of assets at Rs 3,334 crore. GS Nifty Bees and Liquid Bees had assets of over Rs 500 crore each.
 
The two axed schemes were originally part of the Benchmark Asset Management, which Goldman Sachs acquired in March 2011.

The Goldman Sachs Derivatives Fund was launched in 2004. “The investment objective of Goldman Sachs Derivative Fund was to provide absolute returns over and above money market instruments by taking advantage in the underlying cash and derivative markets. “Various strategies would be used as return enhancers,” the scheme document said.
 
The second fund facing axe was launched in 2007. It sought “to provide absolute returns by taking advantage of opportunities in the underlying cash and derivative markets, and through deployment of surplus cash in fixed income securities. The scheme is designed for investors seeking long term capital appreciation primarily through investment in a diversified portfolio of strategies.”

Soon after the acquisition of Benchmark in 2011, Oliver Bolitho, head, Goldman Sachs Asset Management Asia, had said that the acquisition would give the company a strong platform and strong product line in its fund management business in India. "The existing management team would continue as people form an important part of an integration process. The legal name of Benchmark wouldn't continue. It is highly likely that we will retain the Benchmark brand of mutual fund products as it is a strong name in the Indian market,'' he added.