Hedge Funds - Everyone Wants in Right?

oh, yea, they all make money right?

(Reuters) - Goldman Sachs Group shares fell nearly 6 percent on Thursday after another of its hedge funds posted losses and reportedly sold positions.

North American Equity Opportunities, which started the year with about $767 million in assets, was down more than 15 percent this year through July 27, a person familiar with the situation said.

Declines at that fund follow a 12 percent drop in the last two weeks at Global Alpha, Goldman's flagship $9 billion macro hedge fund. That fund is down 16 percent for the year and traders have said the fund is selling parts of its portfolio.

Goldman denied talk on Wednesday it was liquidating the fund and declined further comment. On Thursday, the bank declined to comment on the North American Equity Opportunities fund.

Equity Opportunities is a market neutral stock fund that takes long and short bets. The smaller fund, like Global Alpha, relies on computer-driven "quantitative" trading models.

Goldman shares fell $11.05, or 5.7 percent, to $182.25 on Thursday. Since June 13, Goldman has fallen 22 percent, compared with a 4.1 percent decline for the Standard & Poor's 500 index <.SPX> and a 15.4 percent decline for the Amex Securities Broker Dealer index. <.XBD>

Goldman joins other investment banks managing hedge funds that have struggled during the recent market turbulence.

Swiss bank UBS AG was forced to shut down Dillon Read Capital Management less than two years after its launch following losses on mortgage markets. Bear Stearns Cos shares, and its reputation, were slammed as two of its mortgage funds suffered losses, outflows and then filed for bankruptcy.

Earlier on Thursday, French bank BNP Paribas froze 1.6 billion euros ($2.21 billion) worth of funds, citing problems over U.S. subprime mortgages.

Analysts said hedge fund declines will not have a major impact on earnings at a firm as large and diversified as Goldman. Still, the declines raise worrying questions about Goldman's largest and most mysterious business: securities trading.

"The main threat is on the trading side. That has always been the black box at Goldman that keeps their multiple down," said Les Satlow, a portfolio manager who helps invest $450 million at Cabot Asset Management. "That's the kind of thing that makes investors anxious."

Global Alpha has long been a top performer, fueling growth in Goldman Sachs Asset Management and making the bank one of the world's largest hedge fund managers. Over the years, the fund fattened the wallets of Goldman insiders who invested.

Run by 40-year-olds Mark Carhart and Raymond Iwanowski, Global Alpha uses computer models to make bold bets on stocks, bonds, currencies and commodities worldwide. The fund has had wild swings -- it returned nearly 40 percent in 2005 -- but has delivered positive returns since its inception in 1995.

Weak performance at Alpha has put a dent in Goldman's results in recent quarters. In the first quarter, Goldman's incentive fees from asset management fell 78 percent from a year earlier, to $23 million, reflecting poor performance.

In the second quarter, incentive fees fell 87 percent.

Outside investors responded by pulling out. Goldman's net flows of money into alternative investments were nil in the second quarter, compared with $6 billion received a year ago.