August 9, 2007 (LPAC)--The Wall Street Journal reported this afternoon that in addition to Goldman Sachs's $9 billion Global Alpha fund, its North American Equity Opportunities hedge fund has liquidated some of its positions. Global Alpha has been the subject of rumors this week because of its 16% drop this year. North American Equity Opportunities, an "equity market neutral fund" managing $767 million as of early this year, is down 15% for the year.

"Equity market neutral" means that the fund buys certain stocks "long" and bets against others by shorting their shares; because this activity often generates "impressive" returns and is seen as conservative, such funds often use borrowed money as leverage to increase their returns. Like Global Alpha, North American Equity Opportunities relies on computer programs to execute its trades. Goldman has today "privately thrown cold water on a published report that North American Equity Opportunities hedge fund is liquidating," according to the Journal.

Meanwhile, MarketWatch reported that hedge-fund firm Black Mesa Capital "has told investors that at least one very large hedge fund or investment bank is liquidating 'massive' trading portfolios," and that activity is "causing disruptions and triggering big losses among other so-called market-neutral hedge funds." MarketWatch reported that two hedge-fund investors who didn't want to be identified said the current turmoil is reminiscent of the LTCM collapse in 1998.