UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30,
2011
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number:
000-50723
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
(Exact name of registrant as
specified in its charter)
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Delaware
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04-3638229
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(State or other jurisdiction
of incorporation)
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(I.R.S. Employer
Identification No.)
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200 West Street
New York, New York
(Address of principal
executive offices)
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10282
(Zip
Code)
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Registrants telephone number, including area code:
(212) 902-1000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer o Accelerated
filer o Non-accelerated
filer þ
Smaller reporting
company o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The Registrants Units of Limited Liability Company
Interests are not traded on any market and, accordingly, have no
aggregate market value. The Registrant had 4,532,895.54 Units of
Limited Liability Company Interests outstanding as of
November 14, 2011.
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
QUARTERLY REPORT ON
FORM 10-Q
INDEX
PART I
FINANCIAL INFORMATION
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Item 1.
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Financial
Statements
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GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
September 30, 2011 and December 31, 2010
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(Unaudited)
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(Audited)
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September 30, 2011
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December 31, 2010
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% of
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% of
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Fair
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members
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Fair
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members
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Affiliated Investee
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value
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equity(1)
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value
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equity(1)
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Goldman Sachs Global Equity Long/Short, LLC
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$
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212,222,540
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39.29
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%
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$
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248,593,542
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39.98
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%
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Goldman Sachs Global Fundamental Strategies, LLC
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136,347,003
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25.25
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%
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157,347,212
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25.30
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%
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Goldman Sachs Global Fundamental Strategies Asset Trust
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17,167,960
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3.18
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%
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23,188,415
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3.73
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%
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Goldman Sachs Global Relative Value, LLC
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1,245,229
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0.23
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%
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1,649,094
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0.27
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%
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Goldman Sachs Global Tactical Trading, LLC
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169,959,496
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31.47
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%
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181,173,125
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29.14
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%
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Goldman Sachs HFP Opportunistic Fund, LLC
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707,297
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0.13
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%
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735,686
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0.12
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%
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Total investments (cost $491,222,899 and $529,138,634,
respectively)
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$
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537,649,525
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99.55
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%
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$
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612,687,074
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98.54
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%
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The Companys aggregate proportionate share of the
following underlying investments of the Investees represented
greater than 5% of the Companys members equity at
September 30, 2011 and December 31, 2010.
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September 30, 2011 (Unaudited)
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Proportionate
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% of
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Underlying
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share of
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members
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Investee
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investment
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Strategy
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fair value
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equity(1)
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Goldman Sachs Global Tactical Trading, LLC
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GS Global Trading Advisors,
LLC(2)
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Managed Futures
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$
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42,818,945
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7.93%
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December 31, 2010 (Audited)
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Proportionate
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% of
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Underlying
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share of
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members
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Investee
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investment
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Strategy
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fair value
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equity(1)
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Goldman Sachs Global Tactical Trading, LLC
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GS Global Trading Advisors,
LLC(2)
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Managed Futures
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$
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47,508,604
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7.64%
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(1)
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Members equity used in the
calculation of the fair value of each of the Investees and the
underlying investment as a percentage of members equity,
is based on the members equity per the Balance Sheet and
in accordance with Statement of Financial Accounting Standards
ASC 480, Distinguishing Liabilities from
Equity. Excluding redemptions payable per the Balance
Sheet, total investments would represent 94.61% and 95.63% of
members equity at September 30, 2011 and
December 31, 2010, respectively.
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(2)
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Affiliated investment fund with a
monthly liquidity term.
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See accompanying notes.
1
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
BALANCE
SHEET
September 30, 2011 and December 31, 2010
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(Unaudited)
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(Audited)
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September 30, 2011
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December 31, 2010
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ASSETS
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Assets:
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Investments in affiliated Investees, at fair value (cost
$491,222,899 and $529,138,634, respectively)
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$
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537,649,525
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$
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612,687,074
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Cash and cash equivalents
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33,241,310
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29,949,410
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Total assets
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$
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570,890,835
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$
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642,636,484
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LIABILITIES AND MEMBERS EQUITY
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Liabilities:
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Redemptions payable
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$
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28,190,214
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$
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18,895,114
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Management fee payable
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1,808,099
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1,322,217
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Accrued expenses and other liabilities
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826,278
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625,160
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Total liabilities
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30,824,591
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20,842,491
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Members equity:
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Members equity (units outstanding 4,482,895.54 and
4,849,206.06, respectively)
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540,066,244
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621,793,993
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Total liabilities and members equity
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$
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570,890,835
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$
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642,636,484
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Analysis of members equity:
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Net capital contributions, accumulated net investment
income/(loss) and realized gain/(loss) on investments
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$
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493,639,618
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$
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538,245,553
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Accumulated net unrealized gain/(loss) on investments
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46,426,626
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83,548,440
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Total members
equity(1)
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$
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540,066,244
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$
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621,793,993
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(1)
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Refer to Note 9 for units
outstanding and NAV per unit amounts by series.
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See accompanying notes.
2
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
(Unaudited)
For the three and nine months ended September 30, 2011
and September 30, 2010
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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2011
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2010
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2011
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2010
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Dividend income
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$
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684
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$
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7,398
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$
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6,037
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$
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15,669
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Expenses:
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Management fee
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1,808,099
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1,938,587
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5,709,730
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5,814,568
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Professional fees
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366,246
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121,990
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631,271
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636,418
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Administration fee
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35,805
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26,320
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111,983
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26,320
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Interest expense
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86,122
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153,105
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Miscellaneous expenses
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45,773
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43,331
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139,281
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120,198
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Total expenses
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2,255,923
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2,216,350
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6,592,265
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6,750,609
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Net investment income/(loss)
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(2,255,239
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)
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(2,208,952
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)
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(6,586,228
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)
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(6,734,940
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)
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Realized and unrealized gain/(loss) on investments in affiliated
Investees:
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Net realized gain/(loss)
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5,265,038
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6,539,149
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18,363,541
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29,255,725
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Net change in unrealized gain/(loss)
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(25,273,027
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)
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14,350,441
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(37,121,814
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)
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(13,041,663
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)
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Net realized and unrealized gain/(loss)
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(20,007,989
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)
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20,889,590
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(18,758,273
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)
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16,214,062
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Net income/(loss)
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$
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(22,263,228
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)
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$
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18,680,638
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$
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(25,344,501
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)
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$
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9,479,122
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See accompanying notes.
3
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
STATEMENT
OF CHANGES IN MEMBERS EQUITY
For the nine months ended September 30, 2011
(Unaudited)
and the year ended December 31, 2010 (Audited)
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Managing
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Total
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members
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Members
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members
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equity
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equity
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equity
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Members equity at December 31, 2009
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$
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$
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597,698,035
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$
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597,698,035
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Subscriptions
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64,918,041
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64,918,041
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Redemptions
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(283,319
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)
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(69,624,119
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)
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(69,907,438
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)
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Allocations of net income/(loss):
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Incentive allocation
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283,319
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(283,319
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)
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Pro-rata allocation
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29,085,355
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29,085,355
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Members equity at December 31, 2010
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621,793,993
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|
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621,793,993
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Subscriptions
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22,970,000
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|
22,970,000
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Redemptions
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(5,323
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)
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|
(79,347,925
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)
|
|
|
(79,353,248
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)
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Allocations of net income/(loss):
|
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|
|
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|
|
|
|
|
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Incentive allocation
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|
5,323
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|
|
|
(5,323
|
)
|
|
|
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Pro-rata allocation
|
|
|
|
|
|
|
(25,344,501
|
)
|
|
|
(25,344,501
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members equity at September 30, 2011
|
|
$
|
|
|
|
$
|
540,066,244
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|
|
$
|
540,066,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
4
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
(Unaudited)
For the nine months ended September 30, 2011 and
September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
(25,344,501
|
)
|
|
$
|
9,479,122
|
|
Adjustments to reconcile net income/(loss) to net cash
provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Purchases of investments in affiliated Investees
|
|
|
(9,602,658
|
)
|
|
|
(133,455,226
|
)
|
Proceeds from sales of investments in affiliated Investees
|
|
|
65,881,934
|
|
|
|
135,478,297
|
|
Net realized (gain)/loss from investments in affiliated Investees
|
|
|
(18,363,541
|
)
|
|
|
(29,255,725
|
)
|
Net change in unrealized (gain)/loss of investments in
affiliated Investees
|
|
|
37,121,814
|
|
|
|
13,041,663
|
|
Increase/(decrease) in operating liabilities:
|
|
|
|
|
|
|
|
|
Management fee payable
|
|
|
485,882
|
|
|
|
649,619
|
|
Interest payable
|
|
|
|
|
|
|
13,591
|
|
Accrued expenses and other liabilities
|
|
|
201,118
|
|
|
|
296,169
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities
|
|
|
50,380,048
|
|
|
|
(3,752,490
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
|
22,970,000
|
|
|
|
59,298,042
|
|
Redemptions
|
|
|
(70,058,148
|
)
|
|
|
(57,445,038
|
)
|
|
|
|
|
|
|
|
|
|
Net cash from financing activities
|
|
|
(47,088,148
|
)
|
|
|
1,853,004
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
3,291,900
|
|
|
|
(1,899,486
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
29,949,410
|
|
|
|
35,470,838
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
33,241,310
|
|
|
$
|
33,571,352
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid by the Company during the period for interest
|
|
$
|
|
|
|
$
|
139,514
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
5
Note 1 Organization
Goldman Sachs Hedge Fund Partners, LLC (the
Company) was organized as a limited liability
company, pursuant to the laws of the State of Delaware, and
commenced operations on April 1, 2002 for the principal
purpose of investing in the equity long/short, event driven,
relative value and tactical trading hedge fund sectors (the
Investment Sectors). Currently, substantially all of
the Companys assets are allocated to Goldman Sachs Global
Equity Long/Short, LLC (GELS), Goldman Sachs Global
Fundamental Strategies, LLC (GFS), and Goldman Sachs
Global Tactical Trading, LLC (GTT) (collectively,
the Investment Funds). The balance of the
Companys assets are invested in Goldman Sachs Global
Fundamental Strategies Asset Trust (GFS Trust),
Goldman Sachs Global Relative Value, LLC (GRV) and
Goldman Sachs HFP Opportunistic Fund, LLC (HFPO and,
together with GFS Trust, GRV and the Investment Funds, the
Investees). Each of these Investees invests
indirectly through investment vehicles (Advisor
Funds) managed by such trading advisors (the
Advisors). In addition, the Company may, directly or
indirectly, allocate assets to Advisors whose principal
investment strategies are not within one of the Investment
Sectors. Goldman Sachs Hedge Fund Strategies LLC (GS
HFS), a wholly-owned subsidiary of The Goldman Sachs
Group, Inc., is the managing member (the Managing
Member) and commodity pool operator of the Company and a
registered investment adviser under the U.S. Investment
Advisers Act of 1940, as amended. SEI Global Services, Inc.
(SEI) serves as administrator of the Company.
Note 2 Significant
accounting policies
Basis of
presentation
The financial statements are prepared in accordance with
accounting principles generally accepted in the United States of
America (U.S. GAAP), and are expressed in
United States dollars.
Use of
estimates
The preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and the accompanying notes. Actual results could
differ from those estimates.
Fair
value of investments
The Company is an investment company for financial reporting
purposes and accordingly carries its investments at fair value.
The carrying value of the Companys assets and liabilities
not recorded at fair value that qualify as financial instruments
approximates fair value.
Realized
and unrealized gain/(loss) on investments in affiliated
Investees
Realized and unrealized gain/(loss) on investments in affiliated
Investees includes the change in fair value of each Investee.
Fair values are determined utilizing net asset value
(NAV) information supplied by each individual
Investee, which includes realized and unrealized gains/losses on
underlying investments of the Investees as well as management
fees and incentive fees charged by the Advisors, administration
fees and all other income/expenses of the Investees. See
Note 3 Investments in affiliated
Investees for further information.
Cash and
cash equivalents
Cash and cash equivalents consist of deposits held at banks or
money market funds. Cash equivalents, consisting of investments
in money market funds, are held at financial institutions to
which the Company is exposed to credit risk. Money market funds
are valued at net asset value per share.
6
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 2 Significant
accounting policies (continued)
Allocation of net income/(loss)
Net income/(loss) is allocated monthly to the capital account of
each member in the ratio that the balance of each members
capital account bears to the total balance of all members
capital accounts. The Managing Member earns an annual incentive
allocation equal to 5.0% of any new net appreciation in the NAV
of each series. Any net depreciation in the NAV of a series for
a fiscal year must be recouped prior to the Managing Member
earning an incentive allocation in future years.
Subscriptions
and redemptions
Subscriptions to the Company can be made as of the first day of
each calendar month or at the sole discretion of the Managing
Member. Redemptions from the Company can be made at the end of
each calendar quarter, upon 91 days prior written notice
after a twelve-month holding period or at such other times as
determined in the sole discretion of the Managing Member, as
provided for in the Companys limited liability company
agreement.
Income
taxes
The Company is taxed as a partnership for U.S. federal
income tax purposes. The members include their distributive
share of the Companys taxable income or loss on their
respective income tax returns. Accordingly, no U.S. federal
income tax liability or expense has been recorded in the
financial statements of the Company.
The Managing Member has reviewed the Companys tax
positions for the open tax years by major jurisdictions and has
concluded that no provision for taxes is required in the
Companys financial statements. Such open tax years vary by
jurisdiction and remain subject to examination by the foreign
taxing authorities. The tax liability is also subject to ongoing
interpretation of laws by taxing authorities.
Recent
accounting pronouncements
Improving Disclosures about Fair Value Measurements
(Accounting Standards Codification (ASC)
820). In January 2010, the Financial Accounting
Standards Board (FASB) issued Accounting Standards
Update (ASU)
No. 2010-06,
Fair Value Measurements and Disclosures (Topic
820) Improving Disclosures about Fair Value
Measurements. ASU
No. 2010-06
provides amended disclosure requirements related to fair value
measurements. Certain disclosure requirements of ASU
No. 2010-06
were effective for the Company beginning in the first quarter of
2010, while other disclosure requirements of the ASU are
effective for financial statements issued for reporting periods
beginning after December 15, 2010. Since these amended
principles require only additional disclosures concerning fair
value measurements, adoption did not affect the Companys
financial condition, results of operations or cash flows.
Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and International Financial
Reporting Standards (IFRS) (FASB
ASC 820). In May 2011, the FASB issued ASU
No. 2011-04,
Fair Value Measurements and Disclosures (Topic
820) Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and
IFRS. ASU
No. 2011-04
clarifies the application of existing fair value measurement and
disclosure requirements, changes certain principles related to
measuring fair value, and requires additional disclosures about
fair value measurements. ASU
No. 2011-04
is effective for periods beginning after December 15, 2011.
The Company is currently evaluating the impact of adoption.
7
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 3 Investments
in affiliated Investees
The Investees seek capital appreciation over time by investing
primarily within one of the following Investment Sectors: the
equity long/short sector, the event driven sector, the relative
value sector and the tactical trading sector. The Companys
investments in affiliated Investees are subject to the terms and
conditions of the respective operating agreements. The
investments in affiliated Investees are carried at fair value.
Fair values are determined utilizing NAV information supplied by
each individual affiliated Investee. GS HFS is the managing
member of each of the Investees. GS HFS does not charge the
Company any management fee or incentive allocation at the
Investee level. Realized gains/(losses) on the redemption of
investments in affiliated Investees are calculated using the
specific identification cost method.
Performance of the Company in any period will be dependent upon
the performance in the relevant period by the affiliated
Investees and the weighted average percentage of the
Companys assets in each of the affiliated Investees during
the period. In addition, performance is determined by the
Investment Funds asset allocation with the various
Advisors and the performance of each of their Advisor Funds and
interests held by GFS Trust, GRV and HFPO. NAVs received by the
Investees from, or on behalf of, the Advisor Funds are based on
the fair value of the Advisor Funds underlying investments
in accordance with policies established by each Advisor Fund. GS
HFS, in its capacity as managing member of the Company, performs
additional procedures including Advisor due diligence reviews
and analytical procedures with respect to the NAV provided by
the Advisors to ensure conformity with U.S. GAAP. The
Managing Member has assessed factors including, but not limited
to, Advisors compliance with U.S. GAAP applicable to
fair value measurements and disclosures, price transparency and
valuation procedures in place. NAV provided by the Advisors may
differ from the audited values received subsequent to the date
of the Companys NAV determination. In such cases, the
Company will evaluate the materiality of any such differences.
The following table summarizes the cost of the Companys
investments in the affiliated Investees at September 30,
2011 and December 31, 2010:
|
|
|
|
|
|
|
|
|
Investee
|
|
September 30, 2011
|
|
|
December 31, 2010
|
|
|
GELS
|
|
$
|
204,000,514
|
|
|
$
|
218,989,189
|
|
GFS
|
|
|
129,421,692
|
|
|
|
138,846,103
|
|
GFS Trust
|
|
|
15,808,023
|
|
|
|
20,402,700
|
|
GRV
|
|
|
1,471,822
|
|
|
|
1,686,248
|
|
GTT
|
|
|
139,811,721
|
|
|
|
148,505,266
|
|
HFPO
|
|
|
709,127
|
|
|
|
709,128
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
491,222,899
|
|
|
$
|
529,138,634
|
|
|
|
|
|
|
|
|
|
|
8
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 3 Investments
in affiliated Investees (continued)
The following table summarizes the Companys realized and
unrealized gain/(loss) on investments in affiliated Investees
for the three and nine months ended September 30, 2011 and
September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
Investee
|
|
Liquidity
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
GELS
|
|
|
(1
|
)
|
|
$
|
(15,544,898
|
)
|
|
$
|
9,169,385
|
|
|
$
|
(15,371,002
|
)
|
|
$
|
(1,449,667
|
)
|
GFS
|
|
|
(2
|
)
|
|
|
(6,445,643
|
)
|
|
|
3,205,456
|
|
|
|
(5,102,866
|
)
|
|
|
8,780,168
|
|
GFS Trust
|
|
|
(3
|
)
|
|
|
(548,857
|
)
|
|
|
(117,601
|
)
|
|
|
(849,983
|
)
|
|
|
(659,818
|
)
|
GRV
|
|
|
(4
|
)
|
|
|
(55,540
|
)
|
|
|
7,474
|
|
|
|
(192,404
|
)
|
|
|
138,349
|
|
GTT
|
|
|
(5
|
)
|
|
|
2,596,234
|
|
|
|
8,668,647
|
|
|
|
2,786,371
|
|
|
|
9,494,167
|
|
HFPO
|
|
|
(6
|
)
|
|
|
(9,285
|
)
|
|
|
(43,771
|
)
|
|
|
(28,389
|
)
|
|
|
(89,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
(20,007,989
|
)
|
|
$
|
20,889,590
|
|
|
$
|
(18,758,273
|
)
|
|
$
|
16,214,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Redemptions can be made quarterly
with 61 days notice, or at the sole discretion of the
Managing Member.
|
|
(2)
|
|
Redemptions can be made quarterly
on or after the first anniversary of the initial purchase of the
units with at least 91 days notice, or at the sole
discretion of the Managing Member.
|
|
(3)
|
|
GFS Trust does not provide
investors with a voluntary redemption right. Pursuant to the
terms of the trust agreement for GFS Trust, distributions will
be made to holders of interests in GFS Trust as GFS Trust
receives proceeds in respect of its underlying investments. The
estimated remaining holding period of its remaining underlying
investments range from one to six years.
|
|
(4)
|
|
GRV ceased its trading activities
effective on July 1, 2009, and will dissolve at the time all
assets are liquidated, liabilities are satisfied and liquidation
proceeds are distributed through payment of a liquidating
distribution. GRV suspended redemptions pending the completion
of the liquidation proceedings. The estimated remaining holding
period of its remaining underlying investments range from one to
six years.
|
|
(5)
|
|
Redemptions can be made quarterly
with 60 days notice, or at the sole discretion of the
Managing Member.
|
|
(6)
|
|
HFPOs current holdings
consist solely of one illiquid investment in an Advisor Fund,
which cannot be redeemed until the relevant Advisor liquidates
such investment. The estimated remaining holding period of the
illiquid investment is approximately two to five years.
|
The investment strategy for each Investee is as follows:
Goldman Sachs Global Equity Long/Short, LLC
GELS seeks risk-adjusted absolute returns with volatility lower
than the broad equity markets, primarily through long and short
investment opportunities in the global equity markets.
Strategies generally involve making long and short equity
investments, often based on the Advisors assessment of
fundamental value compared to market price, although Advisors
employ a wide range of styles. Strategies that may be utilized
in the equity long/short sector include catalyst-activist,
consumer, diversified, energy, growth, long-bias, real estate,
multi-strategy, short-term trading and value. Other strategies
may be employed as well.
Goldman Sachs Global Fundamental Strategies, LLC
GFS seeks risk-adjusted absolute returns with volatility and
correlation lower than the broad equity markets by allocating
assets to Advisors that operate primarily in the global event
driven sector. Event driven strategies seek to identify security
price changes resulting from corporate events such as
restructurings, mergers, takeovers, spin-offs, and other special
situations. Corporate event arbitrageurs generally choose their
investments based on their perceptions of the likelihood that
the event or transaction will occur, the amount of time that the
process will take, and the perceived ratio of return to risk.
Strategies that may be utilized in the event driven sector
include catalyst-activist, merger arbitrage/special situations,
credit opportunities/distressed securities and multi-strategy
investing. Other strategies may be employed as well.
9
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 3 Investments
in affiliated Investees (continued)
Goldman
Sachs Global Fundamental Strategies Asset Trust
GS HFS, the managing member of GFS, created GFS Trust, a
Delaware statutory trust, for the benefit of its investors,
including the Company. Goldman Sachs Trust Company, a
Delaware Corporation, is the trustee of GFS Trust (the
Trustee). The Trustee appointed GS HFS as the
Special Assets Direction Advisor, responsible for,
among other duties, disposition of GFS Trust assets. On
March 31, 2009, GFS transferred to GFS Trust its interest
in certain illiquid investments, including illiquid investments
made by Advisor Funds, as well as liquidating vehicles that the
Advisors formed as liquidity decreased for previously liquid
investments, such as certain credit instruments. GFS transferred
to GFS Trust the economic risks and benefits of its interests in
such assets. In connection with such transfer, each investor in
GFS, including the Company, was issued its pro-rata share of GFS
Trust interests based on its ownership in GFS as of the transfer
date. Distributions from GFS Trust in respect of GFS Trust
interests will be made to holders of GFS Trust interests,
including the Company, as amounts in respect of the assets
transferred to GFS Trust are received from the Advisors.
However, the actual timing of these distributions will be
dependent on the Advisors ability to liquidate positions
as market conditions allow, and it could be a significant period
of time before such positions are realized or disposed of.
Goldman
Sachs Global Relative Value, LLC
GRV ceased its trading activities effective July 1, 2009
and will dissolve at the time all assets are liquidated,
liabilities are satisfied and liquidation proceeds are
distributed through payment of a liquidating distribution.
Investors in GRV (including the Company) will receive proceeds
from the liquidation over time as GRV receives redemption
proceeds from Advisor Funds.
Goldman
Sachs Global Tactical Trading, LLC
GTT seeks long-term risk-adjusted returns by allocating its
assets to Advisors that employ strategies primarily within the
tactical trading sector. Tactical trading strategies are
directional trading strategies that generally fall into one of
the following two categories: managed futures strategies and
global macro strategies. Managed futures strategies involve
trading in the global futures and currencies markets, generally
using systematic or discretionary approaches. Global macro
strategies generally utilize analysis of macroeconomic,
geopolitical and financial conditions to develop views on
country, regional or broader economic themes and then seek to
capitalize on such views by trading in securities, commodities,
interest rates, currencies and various financial instruments.
Goldman
Sachs HFP Opportunistic Fund, LLC
HFPOs investment objective is to make opportunistic
investments in underlying Advisor Funds in order to
(a) increase the weighting of a particular Advisor Fund
which had a low weighting in the Company due to a lower target
weight in one of the other Investees or (b) add an Advisor
Fund that is not currently represented in any of the other
Investees.
10
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 3 Investments
in affiliated Investees (continued)
Management
fees and incentive allocation/fees
GS HFS does not charge the Company any management fee or
incentive allocation at the Investee level. The underlying
Advisor Funds held by the Investees charge management and
incentive allocation/fees to the Investees. The following table
reflects the contractual weighted average Advisors
management fee and incentive allocation/fee rates at the
Investee level for the nine months ended September 30, 2011
and September 30, 2010. The weighted average is based on
the period-end fair values of each investment in the Advisor
Fund in proportion to the Investees total investments. The
fee rates used are the contractual rates charged by each
Advisor. The Advisors management fee and incentive
allocation/fee are not paid to the Managing Member.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011
|
|
|
September 30, 2010
|
|
|
|
Management
|
|
|
Incentive
|
|
|
Management
|
|
|
Incentive
|
|
Investee
|
|
fees
|
|
|
allocation/fees
|
|
|
fees
|
|
|
allocation/fees
|
|
|
GELS
|
|
|
1.65
|
%
|
|
|
20.26
|
%
|
|
|
1.61
|
%
|
|
|
19.97
|
%
|
GFS
|
|
|
1.66
|
%
|
|
|
18.50
|
%
|
|
|
1.64
|
%
|
|
|
18.58
|
%
|
GFS Trust
|
|
|
1.52
|
%
|
|
|
17.74
|
%
|
|
|
1.29
|
%
|
|
|
14.74
|
%
|
GRV
|
|
|
1.61
|
%
|
|
|
12.44
|
%
|
|
|
1.04
|
%
|
|
|
9.31
|
%
|
GTT
|
|
|
2.12
|
%
|
|
|
21.51
|
%
|
|
|
1.95
|
%
|
|
|
19.38
|
%
|
HFPO
|
|
|
|
%(1)
|
|
|
|
%(1)
|
|
|
1.98
|
%
|
|
|
19.76
|
%
|
|
|
|
(1)
|
|
The sole Advisor Fund within HFPO
is illiquid and the Advisor has elected to forego the management
and incentive fees.
|
Note
4 Fair Value Measurements
The fair value of a financial instrument is the amount that
would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants
at the measurement date.
The Company uses NAV as its measure of fair value for
investments in Investees when (i) the fund investment does
not have a readily determinable fair value and (ii) the NAV
of the investment fund is calculated in a manner consistent with
the measurement principles of investment company accounting,
including measurement of the underlying investments at fair
value. In evaluating the level at which the fair value
measurements of the Companys investments have been
classified, the Company has assessed factors including, but not
limited to, price transparency, the ability to redeem at NAV at
the measurement date and the existence or absence of certain
restrictions at the measurement date. The three levels of the
fair value hierarchy are described below:
|
|
|
|
|
Level 1 Unadjusted quoted prices in active
markets that are accessible at the measurement date for
identical, unrestricted assets or liabilities;
|
|
|
|
Level 2 Quoted prices in markets that are not
active or financial instruments for which significant inputs are
observable (including investments in Investees that can be
redeemed at the measurement date or in the near-term at NAV),
either directly or indirectly; and
|
|
|
|
Level 3 Prices or valuations that require
significant unobservable inputs (including investments in
Investees that will never have the ability to be voluntarily
redeemed or are restricted from redemption for an uncertain or
extended period of time from the measurement date).
|
11
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note
4 Fair Value Measurements (continued)
The following tables set forth by level within the fair value
hierarchy the Companys assets and liabilities by
investment strategy at fair value measured at September 30,
2011 and December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 (Unaudited)
|
|
Assets
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Investees by investment strategy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Long/Short
|
|
$
|
|
|
|
$
|
212,222,540
|
|
|
$
|
|
|
|
$
|
212,222,540
|
|
Event Driven
|
|
|
|
|
|
|
136,347,003
|
|
|
|
17,167,960
|
|
|
|
153,514,963
|
|
Tactical Trading
|
|
|
|
|
|
|
169,959,496
|
|
|
|
|
|
|
|
169,959,496
|
|
Multi-Sector
|
|
|
|
|
|
|
|
|
|
|
707,297
|
|
|
|
707,297
|
|
Relative Value
|
|
|
|
|
|
|
|
|
|
|
1,245,229
|
|
|
|
1,245,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
518,529,039
|
|
|
$
|
19,120,486
|
|
|
$
|
537,649,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 (Audited)
|
|
Assets
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Investees by investment strategy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Long/Short
|
|
$
|
|
|
|
$
|
248,593,542
|
|
|
$
|
|
|
|
$
|
248,593,542
|
|
Event Driven
|
|
|
|
|
|
|
157,347,212
|
|
|
|
23,188,415
|
|
|
|
180,535,627
|
|
Tactical Trading
|
|
|
|
|
|
|
181,173,125
|
|
|
|
|
|
|
|
181,173,125
|
|
Multi-Sector
|
|
|
|
|
|
|
|
|
|
|
735,686
|
|
|
|
735,686
|
|
Relative Value
|
|
|
|
|
|
|
|
|
|
|
1,649,094
|
|
|
|
1,649,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
587,113,879
|
|
|
$
|
25,573,195
|
|
|
$
|
612,687,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in cash and cash equivalents on the Balance Sheet are
investments in money market funds with a fair value of
$33,211,310 and $29,919,410, which were classified as
Level 1 assets as of September 30, 2011 and
December 31, 2010, respectively.
The following tables summarize the changes in fair value of the
Companys Level 3 investments for the quarter ended
September 30, 2011 and September 30, 2010,
respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Event Driven
|
|
|
Multi-Sector
|
|
|
Relative Value
|
|
|
Total
|
|
|
Balance as at July 1, 2011
|
|
$
|
18,784,632
|
|
|
$
|
716,582
|
|
|
$
|
1,300,769
|
|
|
$
|
20,801,983
|
|
Net realized gain/(loss) from investments
|
|
|
(1,195
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,195
|
)
|
Net change in unrealized gain/(loss) on investments still held
at September 30, 2011
|
|
|
(547,662
|
)
|
|
|
(9,285
|
)
|
|
|
(55,540
|
)
|
|
|
(612,487
|
)
|
Sales
|
|
|
(1,067,815
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,067,815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011
|
|
$
|
17,167,960
|
|
|
$
|
707,297
|
|
|
$
|
1,245,229
|
|
|
$
|
19,120,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note
4 Fair Value Measurements (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Event Driven
|
|
|
Multi-Sector
|
|
|
Relative Value
|
|
|
Total
|
|
|
Balance as at July 1, 2010
|
|
$
|
28,644,724
|
|
|
$
|
787,989
|
|
|
$
|
2,598,182
|
|
|
$
|
32,030,895
|
|
Net realized gain/(loss) from investments
|
|
|
(1,003
|
)
|
|
|
|
|
|
|
(1,292
|
)
|
|
|
(2,295
|
)
|
Net change in unrealized gain/(loss) on investments still held
at September 30, 2010
|
|
|
(116,598
|
)
|
|
|
(43,771
|
)
|
|
|
8,766
|
|
|
|
(151,603
|
)
|
Sales
|
|
|
(455,227
|
)
|
|
|
|
|
|
|
(288,953
|
)
|
|
|
(744,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2010
|
|
$
|
28,071,896
|
|
|
$
|
744,218
|
|
|
$
|
2,316,703
|
|
|
$
|
31,132,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables summarize the changes in fair value of the
Companys Level 3 investments for the nine months
ended September 30, 2011 and September 30, 2010,
respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Event Driven
|
|
|
Multi-Sector
|
|
|
Relative Value
|
|
|
Total
|
|
|
Balance as at January 1, 2011
|
|
$
|
23,188,415
|
|
|
$
|
735,686
|
|
|
$
|
1,649,094
|
|
|
$
|
25,573,195
|
|
Net realized gain/(loss) from investments
|
|
|
(51,546
|
)
|
|
|
|
|
|
|
1,759
|
|
|
|
(49,787
|
)
|
Net change in unrealized gain/(loss) on investments still held
at September 30, 2011
|
|
|
(798,437
|
)
|
|
|
(28,389
|
)
|
|
|
(194,163
|
)
|
|
|
(1,020,989
|
)
|
Sales
|
|
|
(5,170,472
|
)
|
|
|
|
|
|
|
(211,461
|
)
|
|
|
(5,381,933
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011
|
|
$
|
17,167,960
|
|
|
$
|
707,297
|
|
|
$
|
1,245,229
|
|
|
$
|
19,120,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Event Driven
|
|
|
Multi-Sector
|
|
|
Relative Value
|
|
|
Total
|
|
|
Balance as at January 1, 2010
|
|
$
|
37,532,758
|
|
|
$
|
|
|
|
$
|
4,887,674
|
|
|
$
|
42,420,432
|
|
Net realized gain/(loss) from investments
|
|
|
(7,676
|
)
|
|
|
|
|
|
|
47,943
|
|
|
|
40,267
|
|
Net change in unrealized gain/(loss) on investments still held
at September 30, 2010
|
|
|
(652,142
|
)
|
|
|
(49,831
|
)
|
|
|
90,406
|
|
|
|
(611,567
|
)
|
Sales
|
|
|
(8,801,044
|
)
|
|
|
|
|
|
|
(2,709,320
|
)
|
|
|
(11,510,364
|
)
|
Level 3 transfers in
|
|
|
|
|
|
|
794,049
|
|
|
|
|
|
|
|
794,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2010
|
|
$
|
28,071,896
|
|
|
$
|
744,218
|
|
|
$
|
2,316,703
|
|
|
$
|
31,132,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers into and out of Level 3 are effective as of
actual date of the event or circumstances that caused the
transfer.
Note
5 Fees
The Company incurs a monthly management fee paid in arrears to
GS HFS equal to 1.25% per annum of the net assets of the Company
as of each month-end.
13
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note
5 Fees (continued)
Effective August 1, 2010, the Company incurs a monthly
administration fee payable to SEI equal to one twelfth of 0.02%
of the net assets of the Company as of each month end which is
included in Administration fee in the Statement of Operations.
The Company also incurs an indirect monthly administration fee
to SEI at the Investee level which is included in Realized and
unrealized gain/(loss) on investments in affiliated Investees in
the Statement of Operations. For the three months ended
September 30, 2011 and September 30, 2010, the
Companys pro-rata indirect share of the administration fee
charged at the Investee level totaled $65,367 and $88,215,
respectively. For the nine months ended September 30, 2011
and September 30, 2010, the Companys pro-rata
indirect share of the administration fee charged at the Investee
level totaled $206,333 and $244,632, respectively.
Note
6 Risk Management
The Investees investing activities and those of the
Advisor Funds in which they invest expose the Company to various
types of risks that are associated with the financial
investments and markets in which the Investees and such Advisor
Funds invest. In the ordinary course of business, GS HFS, in its
capacity as Managing Member of the Company and the Investees,
attempts to manage a variety of risks, including market,
operational, liquidity and credit risk and attempts to identify,
measure and monitor risk through various mechanisms including
risk management strategies and credit policies. GS HFS monitors
risk guidelines and diversifies exposures across a variety of
instruments, markets and counterparties.
Item 1A of Part I of the Companys Annual Report
on
Form 10-K
for the fiscal year ended December 31, 2010 provides
details of these and other types of risks, some of which are
additional to the information provided in these financial
statements.
Asset allocation is determined by the Companys Managing
Member who manages the allocation of assets to achieve the
investment objectives. Achievement of the investment objectives
involves taking risks. The Managing Member exercises judgment
based on analysis, research and risk management techniques when
making investment decisions. Divergence from target asset
allocations and the composition of the Companys
investments is monitored by the Companys Managing Member.
Market
risk
The potential for changes in the fair value of the
Companys investment portfolio is referred to as market
risk. Commonly used categories of market risk include currency
risk, interest rate risk and price risk.
(i) Currency
risk
The Advisor Funds may invest in financial investments and enter
into transactions denominated in currencies other than its
functional currency. Consequently, the Company, its Investees
and their Advisor Funds may be exposed to risks that the
exchange rate of its functional currency relative to other
foreign currencies may change in a manner that has an adverse
effect on the value of that portion of the Companys or
Investees assets or liabilities denominated in currencies
other than the functional currency.
14
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note
6 Risk Management (continued)
(ii) Interest
rate risk
The Advisor Funds may invest in fixed income securities and
derivatives. Any change to market interest rates relevant for
particular securities may result in the Advisors being unable to
secure similar returns on the expiration of contracts or the
sale of securities. In addition, changes to prevailing interest
rates or changes in expectations of future rates may result in
an increase or decrease in the value of the securities held. In
general, if interest rates rise, the value of the fixed income
securities and derivatives will decline. A decline in interest
rates will in general have the opposite effect.
(iii) Price
risk
Price risk is the risk that the value of the Investees and
Advisor Funds financial investments will fluctuate as a
result of changes in market prices, other than those arising
from currency risk or interest rate risk whether caused by
factors specific to an individual investment, its issuer or any
factor affecting financial investments traded in the market.
As all of the Companys investments in Investees and the
Investees investments in Advisor Funds are carried at fair
value with changes in fair value recognized in the Statement of
Operations, all changes in market conditions will directly
affect net assets. The Companys maximum risk of loss is
limited to the Companys investment in the Investees. The
Investees maximum risk of loss is limited to the
Investees investment in the Advisor Funds.
The Investees investments in the Advisor Funds are
determined utilizing NAVs supplied by, or on behalf of, the
Advisors of each Advisor Fund. Furthermore, NAVs received from
the administrator of the Advisor Funds may be estimates and such
values will be used to calculate the NAV of the Investees for
purposes of determining amounts payable on redemptions and
reported performance of the Investees. Such estimates provided
by the administrators of the Advisor Funds may be subject to
subsequent revisions which may not be reflected in the
Investees final month-end NAV.
Operational
risk
Operational risk is the potential for loss caused by a
deficiency in information, communications, transaction
processing and settlement and accounting systems. The
Companys service providers maintain controls and
procedures for the purpose of mitigating operational risk.
Reviews of the service levels of service providers are performed
on a regular basis. No assurance is given that these measures
will be 100% effective. Operational risk also exists at the
Investee and Advisor Fund level.
Liquidity
risk
Liquidity risk is the risk that the Company will encounter
difficulty in meeting obligations associated with financial
liabilities. The Company provides for the subscription and
redemption of units and it is therefore exposed to the liquidity
risk of meeting member redemptions.
In order to meet its obligations associated with financial
liabilities, the Company primarily redeems from the investments
in the Investees. However, the Companys investments in the
Investees may only be redeemed on a limited basis. As detailed
in Note 3 Investments in affiliated
Investees, neither GFS Trust nor GRV provide investors
with a voluntary redemption right and HFPOs current
holdings consist solely of one illiquid investment in an Advisor
Fund, which cannot be redeemed until the relevant Advisor
liquidates such investment. As a result, the Company may not be
able to quickly liquidate some of its investments in order to
meet liquidity requirements.
15
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note
6 Risk Management (continued)
Certain of the Advisor Funds held by the Investees may have
liquidity exposure related to the Advisors estimates of
the recovery value of these claims against Lehman Brothers
Holdings, Inc. and for certain of its subsidiaries and
affiliates (Lehman), including cash claims involving
amounts owed to the Advisors by Lehman
and/or
proprietary claims involving the recovery of Advisor Funds
assets held by Lehman at the time of its insolvency. These
estimates are based on information received from the majority,
but not all, of the Advisor Funds, and the Company has no way of
independently verifying or otherwise confirming the accuracy of
the information provided. As a result, there can be no guarantee
that such estimates are accurate. There is significant
uncertainty with respect to the ultimate outcome of the Lehman
insolvency proceedings, and therefore the amounts ultimately
recovered in respect of the Advisors claims against Lehman
could be materially different than such estimates. Based on the
information received, the gross indirect exposure to Lehman did
not materially affect the Companys net assets.
Certain of the Advisor Funds held by the Investees are subject
to various
lock-up
provisions. Additionally, an Advisor may, at its discretion,
transfer a portion of an Investees investment in the
Advisor Fund into share classes where liquidity terms are
directed by the Advisor in accordance with the Advisors
operating agreement, commonly referred to as side pocket share
classes (side pockets). These side pockets may have
restricted liquidity and prohibit the Investees from fully
liquidating their investments without delay. The managing member
of the Investees attempts to determine each Advisors
strategy on side pockets through its due diligence process prior
to making an allocation to the Advisor. However, no assurance
can be given on whether or not the Advisor will implement side
pockets during the investment period. The Advisors may also, at
their discretion, suspend redemptions or implement other
restrictions on liquidity which could impact the Investees
ability to meet redemptions submitted by the Company. As of
September 30, 2011 and December 31, 2010,
approximately 2% of the Companys investments in the
Investees were considered illiquid due to restrictions
implemented by the Advisors of the investments held by
Investees, excluding contractual restrictions imposed by the
Advisors at the time of purchase, such as
lock-ups. In
addition, as of September 30, 2011 and December 31,
2010, approximately 3% and 4%, respectively, of the
Companys members equity was considered illiquid due
to restrictions implemented by the Investees, including the lack
of a voluntary redemption right for GFS Trust and GRV.
To mitigate some of the liquidity risks above, the Company has
the ability to suspend redemptions prior to the effectiveness of
redemption requests at the Managing Members sole
discretion should conditions warrant.
Credit
risk
Credit risk is the risk that one party to a contract will cause
a financial loss for the other party by failing to discharge an
obligation.
The Managing Member has adopted procedures to reduce credit risk
related to the Companys dealings with counterparties and
Advisor Funds. Before transacting with any counterparty or
Advisor Fund, the Managing Member or its affiliates evaluate
both creditworthiness and reputation by conducting a credit
analysis of the party, their business and reputation. The credit
risk of approved counterparties and Advisor Funds are then
monitored on an ongoing basis, including periodic reviews of
financial statements and interim financial reports as needed.
Some of the Investees investments in Advisor Funds may
have had credit exposure related to the bankruptcy of Lehman.
See Liquidity risk for further information related
to Lehman exposure.
16
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note
6 Risk Management (continued)
Investment
in Investees risk
The Managing Member generally has limited access, if at all, to
specific information regarding the Advisors portfolios
held by the Investees and relies on valuations provided by, or
on behalf of, the Advisors. Shareholders will be affected by the
Advisors investment policies and decisions in direct
proportion to the amount of the Companys assets that are
invested with each Investee. The NAV of the Advisors
assets will fluctuate in response to, among other things,
various market and economic prospects of investments that the
Advisors make, and as a result, the NAV of the Investees and the
Company will be impacted. Generally, the NAVs provided by, or on
behalf of, the Advisors are only audited on an annual basis and
are not subject to independent third party verification.
Typically, audited financial statements are not received before
issuance of the Companys financial statements.
In the normal course of business, the Advisor Funds may trade
various financial instruments and enter into various investment
transactions with off-balance sheet risk, which include, but are
not limited to, securities sold short, futures, forwards, swaps
and written options. The Managing Member generally will have
limited ability to monitor such investments, to obtain full and
current information and to exercise control rights over such
investments. This could have an adverse effect on the
performance of such investments and, therefore, on the
performance of the Investees and the Company. In order to manage
this risk, the Managing Member performs due diligence reviews
with respect to the Advisors valuation policies and
procedures and performs certain analytical procedures with
respect to the NAV information received. The review and
procedures performed by the Managing Member support its ability
to rely on the NAVs supplied by, or on behalf of, the Advisors.
Note
7 Related parties
The management fee payable in the Balance Sheet represents
management fees due to GS HFS at September 30, 2011 and
December 31, 2010, respectively.
Included in the redemptions payable on the Balance Sheet at
September 30, 2011 and December 31, 2010 were
redemptions due to the Managing Member of $5,323 and $283,319,
respectively.
For the nine months ended September 30, 2011, the Company
earned dividends of $6,037 from an investment in Goldman Sachs
Financial Square Government Fund, a money market fund managed by
Goldman Sachs Asset Management, L.P., an affiliate of GS HFS.
For the nine months ended September 30, 2010, the Company
earned dividends of $14,546 from an investment in Goldman Sachs
Financial Square Government Fund and Goldman Sachs Financial
Square Treasury Obligations Fund, money market funds managed by
Goldman Sachs Asset Management, L.P., an affiliate of GS HFS. At
September 30, 2011 and December 31, 2010, the fair
values of such money market investments was $33,211,310 and
$29,919,410, respectively. The Company will bear its
proportionate share of all fees, including investment advisory
fees, paid by the money market funds.
The Advisor Funds may have executed investment transactions with
various affiliates of the Managing Member.
Directors and executive officers of the Company and the Managing
Member owned less than 1% of the Companys equity at
September 30, 2011 and December 31, 2010. Employees of
Goldman, Sachs & Co. owned approximately 2% of the
Companys equity at September 30, 2011 and
December 31, 2010.
17
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 8
Borrowing facility
The following table summarizes the Companys credit
facility (as amended from time to time, the Credit
Facility) with Barclays Bank PLC (the Facility
Counterparty) between January 1, 2010 and
November 1, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility fee/
|
|
Time
periods(1)(2)
|
|
Maximum
amount(2)
|
|
Interest
rate(3)
|
|
Commitment fee
|
|
|
September 1, 2010 through November 1,
2010(4)
|
|
Lesser of $33,700,000 or 14.25%
of the Companys NAV
|
|
LIBOR plus 5.00%
|
|
|
1.00%
|
|
June 1, 2010 through August 31, 2010
|
|
Lesser of $33,700,000 or 14.25%
of the Companys NAV
|
|
LIBOR plus 1.50%
|
|
|
1.00%
|
|
January 28, 2010 through May 31, 2010
|
|
Lesser of $33,700,000 or
14.25% of the Companys NAV
|
|
LIBOR plus 1.00%
|
|
|
0.29%
|
|
January 1, 2010 through January 27, 2010
|
|
Lesser of $32,000,000 or
14.25% of the Companys NAV
|
|
LIBOR plus 1.00%
|
|
|
0.25%
|
|
|
|
|
(1)
|
|
The Credit Facility matured on
November 1, 2010 and was not renewed.
|
|
(2)
|
|
The Company also granted a security
interest in the Companys cash accounts and any other
accounts that contain any other investment property of the
Company.
|
|
(3)
|
|
London Interbank Offered Rate
(LIBOR).
|
|
(4)
|
|
Effective September 1, 2010,
the Credit Facility was extended to November 1, 2010 and
converted to an uncommitted facility. Additionally, the
commitment fee terminated, and the Company commenced paying a
monthly facility fee to the Facility Counterparty at the rate of
1% per annum of the average Credit Facility through the
termination date of November 1, 2010.
|
The proceeds of the advances under the Credit Facility were used
for liquidity management in connection with subscriptions to the
Company and redemption of the Companys investments in the
Investment Funds and for general purposes not prohibited by the
Credit Facility or the investment guidelines therein. Interest
related to borrowing and the commitment/facility fee is included
in interest expense in the Statement of Operations. Effective
November 1, 2010, the Credit Facility matured and was not
renewed.
Note 9 Members
equity
At September 30, 2011 and December 31, 2010, the
Company had Class A units outstanding. Each series of
Class A units is identical in every regard except with
respect to its individualized incentive allocation base.
Effective January 1, 2011, Class A Series 48,
Class A Series 53, Class A Series 54,
Class A Series 77 through Series 81 and
Class A Series 84 through Series 90 units
were converted into Class A Series 46 units. The
Managing Member does not own any units in the Company.
18
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 9 Members
equity (continued)
The Companys unit activity for the nine month period ended
September 30, 2011 is as follows:
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|
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|
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|
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|
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December 31,
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Unit
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|
|
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|
|
|
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September 30,
|
|
|
|
2010
|
|
|
conversion
|
|
|
Subscriptions
|
|
|
Redemptions
|
|
|
2011
|
|
|
Class A:
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|
|
|
|
|
|
|
|
|
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|
|
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Series 1
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|
2,560,820.36
|
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|
|
|
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|
|
|
|
|
|
(298,882.07
|
)
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|
|
2,261,938.29
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|
Series 45
|
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|
45,322.13
|
|
|
|
|
|
|
|
|
|
|
|
(11,026.05
|
)
|
|
|
34,296.08
|
|
Series 46
|
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|
89,711.22
|
|
|
|
1,435,142.41
|
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|
|
|
|
|
|
(211,421.18
|
)
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1,313,432.45
|
|
Series 47
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|
55,000.00
|
|
|
|
|
|
|
|
|
|
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|
(8,000.00
|
)
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|
47,000.00
|
|
Series 48
|
|
|
101,345.88
|
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|
|
(101,345.88
|
)
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|
|
|
|
|
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|
|
|
|
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|
Series 49
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|
140,800.00
|
|
|
|
|
|
|
|
|
|
|
|
(35,777.27
|
)
|
|
|
105,022.73
|
|
Series 50
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|
194,430.21
|
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|
|
|
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|
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|
(41,077.05
|
)
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|
153,353.16
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|
Series 51
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|
101,300.00
|
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|
|
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|
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|
(37,500.00
|
)
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|
63,800.00
|
|
Series 52
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|
86,750.00
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|
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|
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|
86,750.00
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|
Series 53
|
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55,451.17
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|
(55,451.17
|
)
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|
Series 54
|
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|
589,036.01
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|
(589,036.01
|
)
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|
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|
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|
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Series 66
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|
84,244.41
|
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|
|
|
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|
|
|
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|
(4,063.88
|
)
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80,180.53
|
|
Series 67
|
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|
1,367.32
|
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|
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1,367.32
|
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Series 68
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|
57,080.94
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
57,080.94
|
|
Series 69
|
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|
20,861.87
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,861.87
|
|
Series 70
|
|
|
6,848.67
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,848.67
|
|
Series 71
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|
1,403.93
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,403.93
|
|
Series 72
|
|
|
6,915.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,915.70
|
|
Series 73
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|
1,335.83
|
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|
|
|
|
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|
|
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|
1,335.83
|
|
Series 77
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|
76,950.00
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|
(76,950.00
|
)
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|
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|
Series 78
|
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|
62,345.96
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|
(62,345.96
|
)
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Series 79
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|
71,456.60
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|
(71,456.60
|
)
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Series 80
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|
56,950.00
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|
(56,950.00
|
)
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|
Series 81
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|
201,150.00
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|
(201,150.00
|
)
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|
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Series 82
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|
12,294.48
|
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|
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|
|
|
|
|
(6,147.24
|
)
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|
6,147.24
|
|
Series 83
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|
|
5,460.80
|
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|
|
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|
5,460.80
|
|
Series 84
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|
34,000.00
|
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|
|
(34,000.00
|
)
|
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|
Series 85
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|
16,500.00
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|
|
(16,500.00
|
)
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|
Series 86
|
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|
21,942.57
|
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|
|
(21,942.57
|
)
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Series 87
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|
33,930.00
|
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|
|
(33,930.00
|
)
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Series 88
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1,000.00
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(1,000.00
|
)
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|
Series 89
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|
43,250.00
|
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|
|
(43,250.00
|
)
|
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|
Series 90
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|
11,950.00
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|
|
(11,950.00
|
)
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|
|
|
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|
Series 91
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|
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|
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|
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|
|
39,500.00
|
|
|
|
|
|
|
|
39,500.00
|
|
Series 92
|
|
|
|
|
|
|
|
|
|
|
26,500.00
|
|
|
|
|
|
|
|
26,500.00
|
|
Series 93
|
|
|
|
|
|
|
|
|
|
|
18,250.00
|
|
|
|
|
|
|
|
18,250.00
|
|
Series 94
|
|
|
|
|
|
|
|
|
|
|
39,200.00
|
|
|
|
|
|
|
|
39,200.00
|
|
Series 95
|
|
|
|
|
|
|
|
|
|
|
46,500.00
|
|
|
|
|
|
|
|
46,500.00
|
|
Series 96
|
|
|
|
|
|
|
|
|
|
|
21,000.00
|
|
|
|
|
|
|
|
21,000.00
|
|
Series 97
|
|
|
|
|
|
|
|
|
|
|
17,000.00
|
|
|
|
|
|
|
|
17,000.00
|
|
Series 98
|
|
|
|
|
|
|
|
|
|
|
11,250.00
|
|
|
|
|
|
|
|
11,250.00
|
|
Series 99
|
|
|
|
|
|
|
|
|
|
|
10,500.00
|
|
|
|
|
|
|
|
10,500.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,849,206.06
|
|
|
|
57,884.22
|
|
|
|
229,700.00
|
|
|
|
(653,894.74
|
)
|
|
|
4,482,895.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 9 Members
equity (continued)
The Companys unit activity for the year ended
December 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Unit
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
conversion
|
|
|
Subscriptions
|
|
|
Redemptions
|
|
|
2010
|
|
|
|
|
|
|
|
|
Class A:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 1
|
|
|
2,885,415.51
|
|
|
|
|
|
|
|
|
|
|
|
(324,595.15
|
)
|
|
|
2,560,820.36
|
|
|
|
|
|
|
|
|
|
Series 45
|
|
|
52,822.13
|
|
|
|
|
|
|
|
|
|
|
|
(7,500.00
|
)
|
|
|
45,322.13
|
|
|
|
|
|
|
|
|
|
Series 46
|
|
|
121,252.89
|
|
|
|
|
|
|
|
|
|
|
|
(31,541.67
|
)
|
|
|
89,711.22
|
|
|
|
|
|
|
|
|
|
Series 47
|
|
|
72,250.00
|
|
|
|
|
|
|
|
|
|
|
|
(17,250.00
|
)
|
|
|
55,000.00
|
|
|
|
|
|
|
|
|
|
Series 48
|
|
|
121,500.00
|
|
|
|
|
|
|
|
|
|
|
|
(20,154.12
|
)
|
|
|
101,345.88
|
|
|
|
|
|
|
|
|
|
Series 49
|
|
|
140,800.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140,800.00
|
|
|
|
|
|
|
|
|
|
Series 50
|
|
|
208,466.39
|
|
|
|
|
|
|
|
|
|
|
|
(14,036.18
|
)
|
|
|
194,430.21
|
|
|
|
|
|
|
|
|
|
Series 51
|
|
|
123,068.00
|
|
|
|
|
|
|
|
|
|
|
|
(21,768.00
|
)
|
|
|
101,300.00
|
|
|
|
|
|
|
|
|
|
Series 52
|
|
|
96,750.00
|
|
|
|
|
|
|
|
|
|
|
|
(10,000.00
|
)
|
|
|
86,750.00
|
|
|
|
|
|
|
|
|
|
Series 53
|
|
|
73,550.00
|
|
|
|
|
|
|
|
|
|
|
|
(18,098.83
|
)
|
|
|
55,451.17
|
|
|
|
|
|
|
|
|
|
Series 54
|
|
|
69,350.00
|
|
|
|
592,596.98
|
|
|
|
|
|
|
|
(72,910.97
|
)
|
|
|
589,036.01
|
|
|
|
|
|
|
|
|
|
Series 55
|
|
|
22,500.00
|
|
|
|
(22,500.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 56
|
|
|
10,000.00
|
|
|
|
(10,000.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 57
|
|
|
25,000.00
|
|
|
|
(25,000.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 58
|
|
|
50,000.00
|
|
|
|
(50,000.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 59
|
|
|
15,000.00
|
|
|
|
(15,000.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 60
|
|
|
27,600.00
|
|
|
|
(27,600.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 61
|
|
|
11,312.98
|
|
|
|
(11,312.98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 62
|
|
|
62,000.00
|
|
|
|
(62,000.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 63
|
|
|
66,712.98
|
|
|
|
(66,712.98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 64
|
|
|
36,650.00
|
|
|
|
(36,650.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 65
|
|
|
54,137.27
|
|
|
|
(54,137.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 66
|
|
|
95,580.88
|
|
|
|
|
|
|
|
|
|
|
|
(11,336.47
|
)
|
|
|
84,244.41
|
|
|
|
|
|
|
|
|
|
Series 67
|
|
|
1,367.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,367.32
|
|
|
|
|
|
|
|
|
|
Series 68
|
|
|
57,080.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,080.94
|
|
|
|
|
|
|
|
|
|
Series 69
|
|
|
20,861.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,861.87
|
|
|
|
|
|
|
|
|
|
Series 70
|
|
|
6,848.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,848.67
|
|
|
|
|
|
|
|
|
|
Series 71
|
|
|
1,403.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,403.93
|
|
|
|
|
|
|
|
|
|
Series 72
|
|
|
6,915.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,915.70
|
|
|
|
|
|
|
|
|
|
Series 73
|
|
|
1,335.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,335.83
|
|
|
|
|
|
|
|
|
|
Series 74
|
|
|
83,000.00
|
|
|
|
(83,000.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 75
|
|
|
85,100.00
|
|
|
|
(85,100.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 76
|
|
|
30,850.00
|
|
|
|
(30,850.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 77
|
|
|
|
|
|
|
|
|
|
|
76,950.00
|
|
|
|
|
|
|
|
76,950.00
|
|
|
|
|
|
|
|
|
|
Series 78
|
|
|
|
|
|
|
|
|
|
|
62,345.96
|
|
|
|
|
|
|
|
62,345.96
|
|
|
|
|
|
|
|
|
|
Series 79
|
|
|
|
|
|
|
|
|
|
|
71,456.60
|
|
|
|
|
|
|
|
71,456.60
|
|
|
|
|
|
|
|
|
|
Series 80
|
|
|
|
|
|
|
|
|
|
|
56,950.00
|
|
|
|
|
|
|
|
56,950.00
|
|
|
|
|
|
|
|
|
|
Series 81
|
|
|
|
|
|
|
|
|
|
|
201,150.00
|
|
|
|
|
|
|
|
201,150.00
|
|
|
|
|
|
|
|
|
|
Series 82
|
|
|
|
|
|
|
|
|
|
|
12,294.48
|
|
|
|
|
|
|
|
12,294.48
|
|
|
|
|
|
|
|
|
|
Series 83
|
|
|
|
|
|
|
|
|
|
|
5,460.80
|
|
|
|
|
|
|
|
5,460.80
|
|
|
|
|
|
|
|
|
|
Series 84
|
|
|
|
|
|
|
|
|
|
|
34,000.00
|
|
|
|
|
|
|
|
34,000.00
|
|
|
|
|
|
|
|
|
|
Series 85
|
|
|
|
|
|
|
|
|
|
|
16,500.00
|
|
|
|
|
|
|
|
16,500.00
|
|
|
|
|
|
|
|
|
|
Series 86
|
|
|
|
|
|
|
|
|
|
|
21,942.57
|
|
|
|
|
|
|
|
21,942.57
|
|
|
|
|
|
|
|
|
|
Series 87
|
|
|
|
|
|
|
|
|
|
|
33,930.00
|
|
|
|
|
|
|
|
33,930.00
|
|
|
|
|
|
|
|
|
|
Series 88
|
|
|
|
|
|
|
|
|
|
|
1,000.00
|
|
|
|
|
|
|
|
1,000.00
|
|
|
|
|
|
|
|
|
|
Series 89
|
|
|
|
|
|
|
|
|
|
|
43,250.00
|
|
|
|
|
|
|
|
43,250.00
|
|
|
|
|
|
|
|
|
|
Series 90
|
|
|
|
|
|
|
|
|
|
|
11,950.00
|
|
|
|
|
|
|
|
11,950.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,736,483.29
|
|
|
|
12,733.75
|
|
|
|
649,180.41
|
|
|
|
(549,191.39
|
)
|
|
|
4,849,206.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 9 Members
equity (continued)
The Companys members capital activity for the nine
months ended September 30, 2011 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Net
|
|
|
September 30,
|
|
|
NAV
|
|
|
|
2010
|
|
|
conversion
|
|
|
Subscriptions
|
|
|
Redemptions
|
|
|
income/(loss)
|
|
|
2011
|
|
|
per unit
|
|
|
Managing Member
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(5,323
|
)
|
|
$
|
5,323
|
|
|
$
|
|
|
|
|
|
|
Class A:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 1
|
|
|
386,220,632
|
|
|
|
|
|
|
|
|
|
|
|
(44,325,069
|
)
|
|
|
(15,336,331
|
)
|
|
|
326,559,232
|
|
|
$
|
144.37
|
|
Series 45
|
|
|
4,471,072
|
|
|
|
|
|
|
|
|
|
|
|
(1,082,062
|
)
|
|
|
(150,310
|
)
|
|
|
3,238,700
|
|
|
|
94.43
|
|
Series 46
|
|
|
9,003,589
|
|
|
|
144,033,620
|
|
|
|
|
|
|
|
(21,068,131
|
)
|
|
|
(5,785,897
|
)
|
|
|
126,183,181
|
|
|
|
96.07
|
|
Series 47
|
|
|
5,407,597
|
|
|
|
|
|
|
|
|
|
|
|
(782,461
|
)
|
|
|
(201,653
|
)
|
|
|
4,423,483
|
|
|
|
94.12
|
|
Series 48
|
|
|
10,142,713
|
|
|
|
(10,142,713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 49
|
|
|
13,960,216
|
|
|
|
|
|
|
|
|
|
|
|
(3,471,113
|
)
|
|
|
(521,341
|
)
|
|
|
9,967,762
|
|
|
|
94.91
|
|
Series 50
|
|
|
18,928,004
|
|
|
|
|
|
|
|
|
|
|
|
(3,942,839
|
)
|
|
|
(694,296
|
)
|
|
|
14,290,869
|
|
|
|
93.19
|
|
Series 51
|
|
|
9,855,874
|
|
|
|
|
|
|
|
|
|
|
|
(3,600,617
|
)
|
|
|
(313,276
|
)
|
|
|
5,941,981
|
|
|
|
93.13
|
|
Series 52
|
|
|
8,669,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(370,616
|
)
|
|
|
8,298,522
|
|
|
|
95.66
|
|
Series 53
|
|
|
5,610,812
|
|
|
|
(5,610,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 54
|
|
|
62,770,502
|
|
|
|
(62,770,502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 66
|
|
|
9,079,321
|
|
|
|
|
|
|
|
|
|
|
|
(442,358
|
)
|
|
|
(365,049
|
)
|
|
|
8,271,914
|
|
|
|
103.17
|
|
Series 67
|
|
|
147,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,299
|
)
|
|
|
141,062
|
|
|
|
103.17
|
|
Series 68
|
|
|
6,151,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(262,997
|
)
|
|
|
5,888,819
|
|
|
|
103.17
|
|
Series 69
|
|
|
2,248,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(96,120
|
)
|
|
|
2,152,238
|
|
|
|
103.17
|
|
Series 70
|
|
|
738,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31,555
|
)
|
|
|
706,551
|
|
|
|
103.17
|
|
Series 71
|
|
|
151,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,468
|
)
|
|
|
144,838
|
|
|
|
103.17
|
|
Series 72
|
|
|
745,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31,864
|
)
|
|
|
713,465
|
|
|
|
103.17
|
|
Series 73
|
|
|
143,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,154
|
)
|
|
|
137,813
|
|
|
|
103.17
|
|
Series 77
|
|
|
8,047,216
|
|
|
|
(8,047,216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 78
|
|
|
6,529,247
|
|
|
|
(6,529,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 79
|
|
|
7,466,991
|
|
|
|
(7,466,991
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 80
|
|
|
5,883,928
|
|
|
|
(5,883,928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 81
|
|
|
20,682,620
|
|
|
|
(20,682,620
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 82
|
|
|
1,273,182
|
|
|
|
|
|
|
|
|
|
|
|
(633,275
|
)
|
|
|
(30,531
|
)
|
|
|
609,376
|
|
|
|
99.13
|
|
Series 83
|
|
|
565,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,176
|
)
|
|
|
541,329
|
|
|
|
99.13
|
|
Series 84
|
|
|
3,566,739
|
|
|
|
(3,566,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 85
|
|
|
1,749,127
|
|
|
|
(1,749,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 86
|
|
|
2,311,363
|
|
|
|
(2,311,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 87
|
|
|
3,557,487
|
|
|
|
(3,557,487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 88
|
|
|
103,011
|
|
|
|
(103,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 89
|
|
|
4,394,876
|
|
|
|
(4,394,876
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 90
|
|
|
1,216,988
|
|
|
|
(1,216,988
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 91
|
|
|
|
|
|
|
|
|
|
|
3,950,000
|
|
|
|
|
|
|
|
(168,867
|
)
|
|
|
3,781,133
|
|
|
|
95.72
|
|
Series 92
|
|
|
|
|
|
|
|
|
|
|
2,650,000
|
|
|
|
|
|
|
|
(117,759
|
)
|
|
|
2,532,241
|
|
|
|
95.56
|
|
Series 93
|
|
|
|
|
|
|
|
|
|
|
1,825,000
|
|
|
|
|
|
|
|
(98,670
|
)
|
|
|
1,726,330
|
|
|
|
94.59
|
|
Series 94
|
|
|
|
|
|
|
|
|
|
|
3,920,000
|
|
|
|
|
|
|
|
(204,727
|
)
|
|
|
3,715,273
|
|
|
|
94.78
|
|
Series 95
|
|
|
|
|
|
|
|
|
|
|
4,650,000
|
|
|
|
|
|
|
|
(290,758
|
)
|
|
|
4,359,242
|
|
|
|
93.75
|
|
Series 96
|
|
|
|
|
|
|
|
|
|
|
2,100,000
|
|
|
|
|
|
|
|
(109,059
|
)
|
|
|
1,990,941
|
|
|
|
94.81
|
|
Series 97
|
|
|
|
|
|
|
|
|
|
|
1,700,000
|
|
|
|
|
|
|
|
(64,153
|
)
|
|
|
1,635,847
|
|
|
|
96.23
|
|
Series 98
|
|
|
|
|
|
|
|
|
|
|
1,125,000
|
|
|
|
|
|
|
|
(41,595
|
)
|
|
|
1,083,405
|
|
|
|
96.30
|
|
Series 99
|
|
|
|
|
|
|
|
|
|
|
1,050,000
|
|
|
|
|
|
|
|
(19,303
|
)
|
|
|
1,030,697
|
|
|
|
98.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal:
|
|
|
621,793,993
|
|
|
|
|
|
|
|
22,970,000
|
|
|
|
(79,347,925
|
)
|
|
|
(25,349,824
|
)
|
|
|
540,066,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
621,793,993
|
|
|
$
|
|
|
|
$
|
22,970,000
|
|
|
$
|
(79,353,248
|
)
|
|
$
|
(25,344,501
|
)
|
|
$
|
540,066,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 9 Members
equity (continued)
The Companys members capital activity for the year
ended December 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Net
|
|
|
December 31,
|
|
|
NAV
|
|
|
|
2009
|
|
|
conversion
|
|
|
Subscriptions
|
|
|
Redemptions
|
|
|
income/(loss)
|
|
|
2010
|
|
|
per unit
|
|
|
Managing Member
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(283,319
|
)
|
|
$
|
283,319
|
|
|
$
|
|
|
|
|
|
|
Class A:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 1
|
|
|
415,172,330
|
|
|
|
|
|
|
|
|
|
|
|
(47,275,206
|
)
|
|
|
18,323,508
|
|
|
|
386,220,632
|
|
|
$
|
150.82
|
|
Series 45
|
|
|
4,971,425
|
|
|
|
|
|
|
|
|
|
|
|
(716,408
|
)
|
|
|
216,055
|
|
|
|
4,471,072
|
|
|
|
98.65
|
|
Series 46
|
|
|
11,612,001
|
|
|
|
|
|
|
|
|
|
|
|
(3,068,917
|
)
|
|
|
460,505
|
|
|
|
9,003,589
|
|
|
|
100.36
|
|
Series 47
|
|
|
6,777,089
|
|
|
|
|
|
|
|
|
|
|
|
(1,680,917
|
)
|
|
|
311,425
|
|
|
|
5,407,597
|
|
|
|
98.32
|
|
Series 48
|
|
|
11,601,290
|
|
|
|
|
|
|
|
|
|
|
|
(1,950,610
|
)
|
|
|
492,033
|
|
|
|
10,142,713
|
|
|
|
100.08
|
|
Series 49
|
|
|
13,318,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
641,701
|
|
|
|
13,960,216
|
|
|
|
99.15
|
|
Series 50
|
|
|
19,361,580
|
|
|
|
|
|
|
|
|
|
|
|
(1,321,802
|
)
|
|
|
888,226
|
|
|
|
18,928,004
|
|
|
|
97.35
|
|
Series 51
|
|
|
11,423,377
|
|
|
|
|
|
|
|
|
|
|
|
(2,033,895
|
)
|
|
|
466,392
|
|
|
|
9,855,874
|
|
|
|
97.29
|
|
Series 52
|
|
|
9,224,038
|
|
|
|
|
|
|
|
|
|
|
|
(969,605
|
)
|
|
|
414,705
|
|
|
|
8,669,138
|
|
|
|
99.93
|
|
Series 53
|
|
|
7,104,425
|
|
|
|
|
|
|
|
|
|
|
|
(1,805,063
|
)
|
|
|
311,450
|
|
|
|
5,610,812
|
|
|
|
101.18
|
|
Series 54
|
|
|
7,066,804
|
|
|
|
60,385,988
|
|
|
|
|
|
|
|
(7,592,307
|
)
|
|
|
2,910,017
|
|
|
|
62,770,502
|
|
|
|
106.56
|
|
Series 55
|
|
|
2,379,248
|
|
|
|
(2,379,248
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 56
|
|
|
1,076,095
|
|
|
|
(1,076,095
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 57
|
|
|
2,715,361
|
|
|
|
(2,715,361
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 58
|
|
|
5,386,946
|
|
|
|
(5,386,946
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 59
|
|
|
1,618,719
|
|
|
|
(1,618,719
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 60
|
|
|
2,979,262
|
|
|
|
(2,979,262
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 61
|
|
|
1,212,471
|
|
|
|
(1,212,471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 62
|
|
|
6,519,496
|
|
|
|
(6,519,496
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 63
|
|
|
7,009,995
|
|
|
|
(7,009,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 64
|
|
|
3,809,919
|
|
|
|
(3,809,919
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 65
|
|
|
5,558,740
|
|
|
|
(5,558,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 66
|
|
|
9,827,589
|
|
|
|
|
|
|
|
|
|
|
|
(1,209,389
|
)
|
|
|
461,121
|
|
|
|
9,079,321
|
|
|
|
107.77
|
|
Series 67
|
|
|
140,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,773
|
|
|
|
147,361
|
|
|
|
107.77
|
|
Series 68
|
|
|
5,869,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
282,777
|
|
|
|
6,151,816
|
|
|
|
107.77
|
|
Series 69
|
|
|
2,145,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,349
|
|
|
|
2,248,358
|
|
|
|
107.77
|
|
Series 70
|
|
|
704,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,928
|
|
|
|
738,106
|
|
|
|
107.77
|
|
Series 71
|
|
|
144,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,955
|
|
|
|
151,306
|
|
|
|
107.77
|
|
Series 72
|
|
|
711,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,260
|
|
|
|
745,329
|
|
|
|
107.77
|
|
Series 73
|
|
|
137,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,617
|
|
|
|
143,967
|
|
|
|
107.77
|
|
Series 74
|
|
|
8,401,415
|
|
|
|
(8,401,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 75
|
|
|
8,628,531
|
|
|
|
(8,628,531
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 76
|
|
|
3,089,790
|
|
|
|
(3,089,790
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 77
|
|
|
|
|
|
|
|
|
|
|
7,695,000
|
|
|
|
|
|
|
|
352,216
|
|
|
|
8,047,216
|
|
|
|
104.58
|
|
Series 78
|
|
|
|
|
|
|
|
|
|
|
6,234,596
|
|
|
|
|
|
|
|
294,651
|
|
|
|
6,529,247
|
|
|
|
104.73
|
|
Series 79
|
|
|
|
|
|
|
|
|
|
|
7,145,660
|
|
|
|
|
|
|
|
321,331
|
|
|
|
7,466,991
|
|
|
|
104.50
|
|
Series 80
|
|
|
|
|
|
|
|
|
|
|
5,695,000
|
|
|
|
|
|
|
|
188,928
|
|
|
|
5,883,928
|
|
|
|
103.32
|
|
Series 81
|
|
|
|
|
|
|
|
|
|
|
20,115,000
|
|
|
|
|
|
|
|
567,620
|
|
|
|
20,682,620
|
|
|
|
102.82
|
|
Series 82
|
|
|
|
|
|
|
|
|
|
|
1,229,448
|
|
|
|
|
|
|
|
43,734
|
|
|
|
1,273,182
|
|
|
|
103.56
|
|
Series 83
|
|
|
|
|
|
|
|
|
|
|
546,080
|
|
|
|
|
|
|
|
19,425
|
|
|
|
565,505
|
|
|
|
103.56
|
|
Series 84
|
|
|
|
|
|
|
|
|
|
|
3,400,000
|
|
|
|
|
|
|
|
166,739
|
|
|
|
3,566,739
|
|
|
|
104.90
|
|
Series 85
|
|
|
|
|
|
|
|
|
|
|
1,650,000
|
|
|
|
|
|
|
|
99,127
|
|
|
|
1,749,127
|
|
|
|
106.01
|
|
Series 86
|
|
|
|
|
|
|
|
|
|
|
2,194,257
|
|
|
|
|
|
|
|
117,106
|
|
|
|
2,311,363
|
|
|
|
105.34
|
|
Series 87
|
|
|
|
|
|
|
|
|
|
|
3,393,000
|
|
|
|
|
|
|
|
164,487
|
|
|
|
3,557,487
|
|
|
|
104.85
|
|
Series 88
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
3,011
|
|
|
|
103,011
|
|
|
|
103.01
|
|
Series 89
|
|
|
|
|
|
|
|
|
|
|
4,325,000
|
|
|
|
|
|
|
|
69,876
|
|
|
|
4,394,876
|
|
|
|
101.62
|
|
Series 90
|
|
|
|
|
|
|
|
|
|
|
1,195,000
|
|
|
|
|
|
|
|
21,988
|
|
|
|
1,216,988
|
|
|
|
101.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal:
|
|
$
|
597,698,035
|
|
|
$
|
|
|
|
$
|
64,918,041
|
|
|
$
|
(69,624,119
|
)
|
|
$
|
28,802,036
|
|
|
$
|
621,793,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
597,698,035
|
|
|
$
|
|
|
|
$
|
64,918,041
|
|
|
$
|
(69,907,438
|
)
|
|
$
|
29,085,355
|
|
|
$
|
621,793,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 10 Ownership
in Investees
During the nine months ended September 30, 2011 and the
year ended December 31, 2010, the Companys ownership
percentage of certain Investees exceeded 50%. This ownership
percentage will fluctuate as a result of the Companys
investment strategy and investor subscriptions and redemptions
at the Company and Investee levels. The Company does not
consolidate the results of the Investees in its financial
statements because the Company does not invest in such Investees
for purposes of exercising control; ownership in excess of 50%
may be temporary; and the consolidation of these balances would
not enhance the usefulness or understandability of information
to the members. The Company does not exercise control over
majority owned Investees. The following tables summarize the
Companys ownership in the Investees at September 30,
2011 and December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 (Unaudited)
|
|
|
|
|
|
|
|
|
|
% owned
|
|
|
|
Company
|
|
|
Investee
|
|
|
by the
|
|
|
|
investment
|
|
|
equity(1)
|
|
|
Company(1)
|
|
|
GELS
|
|
$
|
212,222,540
|
|
|
$
|
449,449,965
|
|
|
|
47.22
|
%
|
GFS
|
|
|
136,347,003
|
|
|
|
339,218,047
|
|
|
|
40.19
|
%
|
GFS Trust
|
|
|
17,167,960
|
|
|
|
61,095,085
|
|
|
|
28.10
|
%
|
GRV
|
|
|
1,245,229
|
|
|
|
4,740,413
|
|
|
|
26.27
|
%
|
GTT
|
|
|
169,959,496
|
|
|
|
472,144,358
|
|
|
|
36.00
|
%
|
HFPO
|
|
|
707,297
|
|
|
|
1,191,230
|
|
|
|
59.38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
537,649,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 (Audited)
|
|
|
|
|
|
|
|
|
|
% owned
|
|
|
|
Company
|
|
|
Investee
|
|
|
by the
|
|
|
|
investment
|
|
|
equity(1)
|
|
|
Company(1)
|
|
|
GELS
|
|
$
|
248,593,542
|
|
|
$
|
511,245,480
|
|
|
|
48.63
|
%
|
GFS
|
|
|
157,347,212
|
|
|
|
381,734,121
|
|
|
|
41.22
|
%
|
GFS Trust
|
|
|
23,188,415
|
|
|
|
82,519,893
|
|
|
|
28.10
|
%
|
GRV
|
|
|
1,649,094
|
|
|
|
6,277,870
|
|
|
|
26.27
|
%
|
GTT
|
|
|
181,173,125
|
|
|
|
397,291,003
|
|
|
|
45.60
|
%
|
HFPO
|
|
|
735,686
|
|
|
|
1,239,043
|
|
|
|
59.38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
612,687,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The Investees equity used in
the calculation of the percentage owned by the Company is based
on the net assets per the Investees Balance Sheet and in
accordance with ASC 480, Distinguishing Liabilities
from Equity.
|
23
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 11 Indemnifications
The Company enters into contracts that contain a variety of
indemnification arrangements. The indemnification arrangements
the Company has entered into with service providers include
provisions for the Company to indemnify and hold harmless such
service providers for certain liabilities. These indemnification
arrangements typically cover liabilities incurred by service
providers in connection with the services provided under the
contractual arrangements with the Company and are generally
entered into as part of a negotiated contractual arrangement
stipulating the furnishing of the delineated services. However,
under the terms of such contractual arrangements, the Company
will not be required to indemnify service providers in certain
situations to the extent that the liabilities incurred by the
service providers were caused by the gross negligence, willful
misconduct, bad faith, reckless disregard of duties, or similar
conduct on the part of the service provider. The Companys
maximum exposure under these arrangements is unknown. It is not
possible to estimate the maximum potential exposure under these
agreements, because the indemnification arrangements relate to
unforeseeable liabilities suffered as a result of the conduct of
the Company or other parties, which is presently unknown or
unforeseeable. However, the Company has not had prior claims or
losses pursuant to these indemnification arrangements and
expects the risk of material loss to be remote
24
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 12
Financial highlights
Financial highlights for the Company for the three and nine
months ended September 30, 2011 and 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
Class A
|
|
|
Class A
|
|
|
Class A
|
|
|
Class A
|
|
|
|
Series 1
|
|
|
Series 1
|
|
|
Series 1
|
|
|
Series 1
|
|
|
Per unit operating performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
150.03
|
|
|
$
|
141.85
|
|
|
$
|
150.82
|
|
|
$
|
143.89
|
|
Income from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gain/(loss)
|
|
|
(5.09
|
)
|
|
|
4.85
|
|
|
|
(4.82
|
)
|
|
|
3.87
|
|
Net investment
income/(loss)(1)(2)
|
|
|
(0.57
|
)
|
|
|
(0.51
|
)
|
|
|
(1.63
|
)
|
|
|
(1.57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income/(loss) from operations
|
|
|
(5.66
|
)
|
|
|
4.34
|
|
|
|
(6.45
|
)
|
|
|
2.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
$
|
144.37
|
|
|
$
|
146.19
|
|
|
$
|
144.37
|
|
|
$
|
146.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to average members
equity(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
1.55
|
%
|
|
|
1.42
|
%
|
|
|
1.45
|
%
|
|
|
1.46
|
%
|
Incentive allocation
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses and incentive allocation
|
|
|
1.55
|
%
|
|
|
1.42
|
%
|
|
|
1.45
|
%
|
|
|
1.46
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income/(loss)(2)
|
|
|
(1.55
|
)%
|
|
|
(1.41
|
)%
|
|
|
(1.45
|
)%
|
|
|
(1.45
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return (prior to incentive
allocation)(4)
|
|
|
(3.77
|
)%
|
|
|
3.06
|
%
|
|
|
(4.28
|
)%
|
|
|
1.60
|
%
|
Incentive allocation
|
|
|
(0.00
|
)%
|
|
|
(0.00
|
)%
|
|
|
(0.00
|
)%
|
|
|
(0.00
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return
|
|
|
(3.77
|
)%
|
|
|
3.06
|
%
|
|
|
(4.28
|
)%
|
|
|
1.60
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Net investment income/(loss) is
calculated based on average units outstanding during the period.
|
|
(2)
|
|
Includes incentive allocation, if
applicable.
|
|
(3)
|
|
The ratios of expenses and net
investment income/(loss) to average members equity are
calculated by dividing total expenses and net investment
income/(loss), respectively, by the month-end average
members equity for the period. The ratios to average
members equity calculated above do not include the
Companys proportionate share of the net investment income
and expenses of the Investees. The ratios to average
members equity for each member may vary based on
individualized incentive allocation bases and the timing of
capital transactions.
|
|
(4)
|
|
The components of total return are
calculated by dividing the change in the per unit value of each
component for the period by the NAV per unit at the beginning of
the period. The total return for Class A
Series 1 units is calculated taken as a whole. The
total return for each member may vary based on individualized
incentive allocation bases and the timing of capital
transactions.
|
The per unit operating performance, ratios to average net assets
and total return are calculated and presented for the initial
series.
25
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 13
Significant Investees
The following is a summary of financial information for
Investees that represented more than 20% of the Companys
total assets
and/or
income as of
and/or for
the nine months ended September 30, 2011 (the
Significant Investees):
Balance
Sheet
The balance sheets as of September 30, 2011 and
December 31, 2010, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 (Unaudited)
|
|
|
|
GELS
|
|
|
GFS
|
|
|
GTT
|
|
|
Assets
|
Investments in Investees, at fair value
|
|
$
|
452,006,042
|
|
|
$
|
317,972,650
|
|
|
$
|
250,511,361
|
|
Investments in affiliated Investees, at fair value
|
|
|
|
|
|
|
22,986,988
|
|
|
|
214,201,216
|
|
Cash and cash equivalents
|
|
|
10,178,545
|
|
|
|
19,938,675
|
|
|
|
1,070,793
|
|
Other assets
|
|
|
131,626
|
|
|
|
3,141
|
|
|
|
15,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
462,316,213
|
|
|
$
|
360,901,454
|
|
|
$
|
480,783,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Net Assets
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemptions payable
|
|
$
|
12,005,255
|
|
|
$
|
21,112,346
|
|
|
$
|
6,947,509
|
|
Accrued expenses and other liabilities
|
|
|
860,993
|
|
|
|
571,061
|
|
|
|
1,691,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
12,866,248
|
|
|
|
21,683,407
|
|
|
|
8,639,012
|
|
Net assets
|
|
|
449,449,965
|
|
|
|
339,218,047
|
|
|
|
472,144,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and net assets
|
|
$
|
462,316,213
|
|
|
$
|
360,901,454
|
|
|
$
|
480,783,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 (Audited)
|
|
|
|
GELS
|
|
|
GFS
|
|
|
GTT
|
|
|
Assets
|
Investments in Investees, at fair value
|
|
$
|
502,195,620
|
|
|
$
|
351,240,904
|
|
|
$
|
195,143,057
|
|
Investments in affiliated Investees, at fair value
|
|
|
|
|
|
|
27,393,668
|
|
|
|
195,355,421
|
|
Cash and cash equivalents
|
|
|
36,020,084
|
|
|
|
8,819,210
|
|
|
|
13,003,556
|
|
Other assets
|
|
|
3,495,222
|
|
|
|
6,067,742
|
|
|
|
8,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
541,710,926
|
|
|
$
|
393,521,524
|
|
|
$
|
412,002,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Net Assets
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemptions payable
|
|
$
|
6,558,606
|
|
|
$
|
11,292,278
|
|
|
$
|
11,183,178
|
|
Subscriptions received in advance
|
|
|
20,000,000
|
|
|
|
|
|
|
|
2,990,000
|
|
Loan Payable
|
|
|
3,100,000
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other liabilities
|
|
|
806,840
|
|
|
|
495,125
|
|
|
|
537,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
30,465,446
|
|
|
|
11,787,403
|
|
|
|
14,711,031
|
|
Net assets
|
|
|
511,245,480
|
|
|
|
381,734,121
|
|
|
|
397,291,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and net assets
|
|
$
|
541,710,926
|
|
|
$
|
393,521,524
|
|
|
$
|
412,002,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 13 Significant
Investees (continued)
Statement
of Operations
For the three months ended September 30, 2011 and
September 30, 2010, the statements of operations are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 (Unaudited)
|
|
Income/(Loss)
|
|
GELS
|
|
|
GFS
|
|
|
GTT
|
|
|
Net realized gain/(loss) on Investees
|
|
$
|
2,997,811
|
|
|
$
|
5,826,501
|
|
|
$
|
7,821,860
|
|
Net change in unrealized gain/(loss) on Investees
|
|
|
(36,465,416
|
)
|
|
|
(22,562,363
|
)
|
|
|
(672,767
|
)
|
Investment income
|
|
|
581
|
|
|
|
336
|
|
|
|
269
|
|
Expenses
|
|
|
(525,432
|
)
|
|
|
(567,169
|
)
|
|
|
(1,035,961
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) from operations
|
|
$
|
(33,992,456
|
)
|
|
$
|
(17,302,695
|
)
|
|
$
|
6,113,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 (Unaudited)
|
|
Income/(Loss)
|
|
GELS
|
|
|
GFS
|
|
|
GTT
|
|
|
Net realized gain/(loss) on Investees
|
|
$
|
287,736
|
|
|
$
|
6,278,553
|
|
|
$
|
(1,477,259
|
)
|
Net change in unrealized gain/(loss) on Investees
|
|
|
18,765,103
|
|
|
|
2,151,421
|
|
|
|
20,086,295
|
|
Investment income
|
|
|
1,595
|
|
|
|
1,795
|
|
|
|
1,233
|
|
Expenses
|
|
|
(486,675
|
)
|
|
|
(534,272
|
)
|
|
|
(576,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) from operations
|
|
$
|
18,567,759
|
|
|
$
|
7,897,497
|
|
|
$
|
18,034,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2011 and
September 30, 2010, the statements of operations are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 (Unaudited)
|
|
Income/(Loss)
|
|
GELS
|
|
|
GFS
|
|
|
GTT
|
|
|
Net realized gain/(loss) on Investees
|
|
$
|
5,199,281
|
|
|
$
|
25,552,810
|
|
|
$
|
8,836,726
|
|
Net change in unrealized gain/(loss) on Investees
|
|
|
(37,600,542
|
)
|
|
|
(38,200,872
|
)
|
|
|
(1,509,133
|
)
|
Investment income
|
|
|
3,360
|
|
|
|
2,107
|
|
|
|
2,861
|
|
Expenses
|
|
|
(1,736,957
|
)
|
|
|
(1,792,051
|
)
|
|
|
(2,898,166
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) from operations
|
|
$
|
(34,134,858
|
)
|
|
$
|
(14,438,006
|
)
|
|
$
|
4,432,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 (Unaudited)
|
|
Income/(Loss)
|
|
GELS
|
|
|
GFS
|
|
|
GTT
|
|
|
Net realized gain/(loss) on Investees
|
|
$
|
1,884,146
|
|
|
$
|
16,844,064
|
|
|
$
|
2,029,662
|
|
Net change in unrealized gain/(loss) on Investees
|
|
|
(3,532,786
|
)
|
|
|
7,086,086
|
|
|
|
18,668,598
|
|
Investment income
|
|
|
5,169
|
|
|
|
5,257
|
|
|
|
2,968
|
|
Expenses
|
|
|
(1,164,605
|
)
|
|
|
(1,415,709
|
)
|
|
|
(1,458,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) from operations
|
|
$
|
(2,808,076
|
)
|
|
$
|
22,519,698
|
|
|
$
|
19,243,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
GOLDMAN
SACHS HEDGE FUND PARTNERS, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
September 30, 2011
Note 13 Significant
Investees (continued)
Statement
of Cash Flows
For the nine months ended September 30, 2011 and
September 30, 2010, the statements of cash flows are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 (Unaudited)
|
|
|
|
GELS
|
|
|
GFS
|
|
|
GTT
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) from operations
|
|
$
|
(34,134,858
|
)
|
|
$
|
(14,438,006
|
)
|
|
$
|
4,432,288
|
|
Net change in investments in investees
|
|
|
50,189,578
|
|
|
|
37,674,934
|
|
|
|
(74,214,099
|
)
|
Net change in operating assets and liabilities
|
|
|
3,417,749
|
|
|
|
6,140,537
|
|
|
|
(5,346,350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by/(used in) operating activities
|
|
|
19,472,469
|
|
|
|
29,377,465
|
|
|
|
(75,128,161
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net subscriptions/(redemptions)
|
|
|
(42,214,008
|
)
|
|
|
(18,258,000
|
)
|
|
|
63,195,398
|
|
Proceeds/(repayments) from loan
|
|
|
(3,100,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by/(used in) financing activities
|
|
|
(45,314,008
|
)
|
|
|
(18,258,000
|
)
|
|
|
63,195,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
(25,841,539
|
)
|
|
|
11,119,465
|
|
|
|
(11,932,763
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
36,020,084
|
|
|
|
8,819,210
|
|
|
|
13,003,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
10,178,545
|
|
|
$
|
19,938,675
|
|
|
$
|
1,070,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 (Unaudited)
|
|
|
|
GELS
|
|
|
GFS
|
|
|
GTT
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) from operations
|
|
$
|
(2,808,076
|
)
|
|
$
|
22,519,698
|
|
|
$
|
19,243,127
|
|
Net change in investments in investees
|
|
|
(64,554,689
|
)
|
|
|
(37,963,364
|
)
|
|
|
(74,359,654
|
)
|
Net change in operating assets and liabilities
|
|
|
(3,066,746
|
)
|
|
|
2,403,040
|
|
|
|
12,534,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by/(used in) operating activities
|
|
|
(70,429,511
|
)
|
|
|
(13,040,626
|
)
|
|
|
(42,582,311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net subscriptions/(redemptions)
|
|
|
36,151,282
|
|
|
|
2,909,784
|
|
|
|
42,884,919
|
|
Proceeds/(repayments) from loan
|
|
|
16,600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by/(used in) financing activities
|
|
|
52,751,282
|
|
|
|
2,909,784
|
|
|
|
42,844,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
(17,678,229
|
)
|
|
|
(10,130,842
|
)
|
|
|
302,608
|
|
Cash and cash equivalents at beginning of period
|
|
|
18,030,775
|
|
|
|
25,410,020
|
|
|
|
8,723,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
352,546
|
|
|
$
|
15,279,178
|
|
|
$
|
9,025,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Overview
The following discussion should be read in conjunction with the
financial statements of Goldman Sachs Hedge Fund Partners,
LLC (the Company) and the related notes thereto.
The Company is a Delaware limited liability company organized in
March 2002 to operate as an investment fund. It commenced
operations on April 1, 2002. GS HFS, a Delaware limited
liability company, serves as the Companys managing member
(the Managing Member).
As of September 30, 2011, the Company had total assets of
$570,890,835 compared with total assets of $642,636,484 as of
December 31, 2010. Total liabilities of the Company were
$30,824,591 as of September 30, 2011 compared with
$20,842,491 as of December 31, 2010. Members equity
of the Company was $540,066,244 as of September 30, 2011
compared with $621,793,993 as of December 31, 2010.
The Companys investment objective is to target attractive
long-term risk-adjusted returns across a variety of market
environments with volatility and correlation that are lower than
those of the broad equity markets. To achieve this objective,
the Company allocates all or substantially all of its assets
among investment funds managed by the Managing Member (such
funds and any successor funds thereto, individually, an
Investment Fund and collectively the
Investment Funds), each of which (directly or
through other entities) allocates its assets to, or invests in
entities managed by, independent investment managers
(collectively, the Advisors) that employ a broad
range of investment strategies primarily within one or more of
the following hedge fund sectors (each, an Investment
Sector and, collectively, the Investment
Sectors): the tactical trading sector, the equity
long/short sector, the event driven sector and the relative
value sector. Currently, substantially all of the Companys
assets are invested in three Investment Funds, each of which is
managed by the Managing Member. The current Investment Funds are
Goldman Sachs Global Equity Long/Short, LLC (GELS),
which employs investment strategies within the equity long/short
sector; Goldman Sachs Global Fundamental Strategies, LLC
(GFS), which employs investment strategies within
the event driven sector; and Goldman Sachs Global Tactical
Trading, LLC (GTT), which employs investment
strategies in the tactical trading sector. The balance of the
Companys assets are invested in Goldman Sachs Global
Fundamental Strategies Asset Trust (GFS Trust),
which is a trust containing certain interests in illiquid assets
transferred by GFS and Goldman Sachs Global Relative Value, LLC
(GRV), which are both in the process of liquidation;
and Goldman Sachs HFP Opportunistic Fund, LLC (HFPO
and together with GFS Trust, GRV and the Investment Funds, the
Investees), which employs investment strategies
within one or more of the Investment Sectors. In addition, the
Company may, directly or indirectly, allocate assets to Advisors
whose principal investment strategies are not within one of the
Investment Sectors referenced herein.
Performance of the Company in any period will be dependent upon
the performance in the relevant period by the Investees and the
weighted average percentage of the Companys assets in each
of the Investees during the period. In addition, performance is
determined by the allocation by the Investment Funds of their
assets with the various Advisors and the performance of each of
those Advisors.
While the Managing Member currently expects to allocate assets
to all the Investment Sectors through allocations to the
Investment Funds, the Managing Member has no constraints with
respect to the percentage of the Companys assets to be
allocated, directly or indirectly, to any single Advisor, group
of Advisors, Investment Fund, or Investment Sector, or with
respect to the number of Investment Funds and Advisors to which,
directly or indirectly, assets of the Company are allocated at
any time. The percentage of the Companys assets to be
allocated to any single Advisor, group of Advisors, Investment
Fund or Investment Sector, and the number of Investment Funds
and Advisors to which the Company allocates assets from time to
time will be determined by the Managing Member in its sole
discretion, based on factors deemed relevant by the Managing
Member at the time of such allocation, which may include the
amount of the Companys assets under management,
constraints on the capital capacity of the Investment Funds and
Advisors, the availability of attractive opportunities, and
other portfolio construction and portfolio management
considerations.
29
The performance described herein is based in part on estimates
of the recovery value of the Advisors claims against
Lehman Brothers Holdings, Inc. and for certain subsidiaries and
affiliates (Lehman), including cash claims involving
amounts owed to the Advisors by Lehman
and/or
proprietary claims involving the recovery of the Advisors
assets held by Lehman at the time of its insolvency. These
estimates are based on information received from the majority,
but not all of, the Advisors, and the Company has no way of
independently verifying or otherwise confirming the accuracy of
the information provided. As a result, there can be no guarantee
that such estimates are accurate. There is significant
uncertainty with respect to the ultimate outcome of the Lehman
insolvency proceedings, and therefore the amounts ultimately
recovered in respect of the Advisors claims against Lehman
could be materially different than such estimates. Based on the
information received, the gross indirect exposure to Lehman did
not materially affect the Companys Members Equity.
The managing member of GFS created GFS Trust, a Delaware
statutory trust, for the benefit of its investors, including the
Company. On March 31, 2009, GFS transferred to GFS Trust
its interest in certain illiquid investments, including illiquid
investments made by Advisor Funds, as well as liquidating
vehicles that Advisors formed as liquidity decreased for
previously liquid investments, such as certain credit
instruments. See Liquidity and Capital
Resources for a further discussion of GFS Trust.
GRV ceased trading activities effective July 1, 2009 and
will dissolve at the time all assets are liquidated, liabilities
are satisfied and liquidation proceeds are distributed through
payment of a liquidating distribution. Investors in GRV
(including the Company) will receive proceeds from the
liquidation over time as GRV receives redemption proceeds from
Advisors. See Liquidity and Capital
Resources and ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK Risk
Management.
The Companys results depend on the Managing Member,
including in its capacity as managing member of each of the
Investment Funds, and the ability of the Managing Member to
recognize and capitalize on trends and other profit and
investment opportunities within the Investment Sectors. Unlike
many operating businesses, general economic or seasonal
conditions may not have any direct effect on the profit
potential of the Company due to the uncertain nature of the
Companys investments and since the Companys
investments in the Investment Funds are managed to seek to
eliminate or reduce the impact of general economic or seasonal
conditions. In addition, the Companys past performance is
not necessarily indicative of future results. Each Investment
Fund allocates assets to Advisors that invest in various markets
at different times and prior activity in a particular market
does not mean that such market will be invested in by the
Advisors or will be profitable in the future.
Results
of Operations for the Three and Nine Months Ended
September 30, 2011 and September 30, 2010
The following presents a summary of the operations for the three
and nine months ended September 30, 2011 and
September 30, 2010 and a general discussion of each
material Investees performance during those periods. The
Investees dealing net asset value (NAV) and
reported performance are prepared using the latest information
available from the Advisor Funds at the time of such valuation
in accordance with their Limited Liability Company Agreement.
The Investees investments in the Advisor Funds are
determined utilizing NAVs supplied by, or on behalf of, the
Advisors of each Advisor Fund. Furthermore, NAVs received from
the administrator of the Advisor Funds may be estimates and such
values will be used to calculate the NAV of the Investees for
purposes of determining amounts payable on redemptions and
reported performance of the Investees. Such estimates provided
by the administrators of the Advisor Funds may be subject to
subsequent revisions which may not be reflected in the
Investees final month-end dealing NAV. The annual audited
financial statements may reflect adjustments for such subsequent
revisions which may result in a variance between the
Investees total return reported in their audited financial
statements and the reported performance based on the month-end
dealing NAV.
Performance
for the Three and Nine Months Ended September 30,
2011
The Companys net realized and unrealized gain/(loss) for
the three and nine months ended September 30, 2011 was
$(20,007,989) and $(18,758,273), respectively, compared to the
Companys net realized and unrealized gain/(loss) for the
three and nine months ended September 30, 2010 of
$20,889,590 and $16,214,062, respectively.
30
Overview
The Company is designed to be broadly exposed to the hedge fund
market by allocating its assets to the Investment Funds in the
Investment Sectors. As further described under ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK Risk Management, quantitative
analysis is combined with judgment to determine weightings,
strategic return, risk and correlation estimates to inform the
quantitative analysis. Judgment is applied to both estimates and
weights in an attempt to achieve exposure to hedge funds while
targeting attractive risk adjusted returns.
Worries about long-term sovereign debt trajectories and European
bank solvency negatively impacted market sentiment during the
third quarter of 2011. Markets reflected increasing investor
concern as signs of a potential global growth slow-down
resurfaced. After averaging 18 for the first seven months of
2011, the VIX index averaged 35 and did not dip below 23 during
the month of August, reaching a yearly high of 48 on
August 8. World equities (proxied by the MSCI AC World TR
Index) finished down 7.3% in August and then down 9.4% in
September, bringing the
year-to-date
return to -17.4%. Headlines dictated market sentiment in the
credit space as well, albeit with less volatility than equity
positions. High yield bonds returned -5.1% for the third quarter
and -0.5% for the full year 2011 (proxied by the Credit Suisse
High Yield Index) and leveraged loans (proxied by the S&P
Leveraged Loan Index) returned -3.4% for the third quarter and
-1.3% for the full year 2011. Credit flows were negative for the
third quarter, with August recording the largest and second
largest outflows on record for leveraged loans and high yield
bonds, respectively. In August and early September, fears of
debt contagion in the Eurozone led to higher credit default swap
(CDS) spreads across the region, with formerly
overlooked EU members such as France under increased scrutiny.
The years steady downward trend for 5-year and 10-year
yields was accelerated by these developments throughout the
third quarter. Overall, yields on US and European 10-year bonds
dropped an additional 124 bps and 114 bps,
respectively, over the quarter (proxied by the US and Euro
Generic Government Bond 10-Year Yields). In currencies, the
US Dollar reversed its recent trend of depreciation as risk
selloffs in September and August sparked a flight to perceived
quality. There were a few notable exceptions: EUR/USD
experienced limited movement in either direction throughout most
of the summer, and Asian and commodity-related currencies
alternately gained and lost ground versus the US dollar
throughout the summer until the Federal Reserve announcement of
Operation Twist on September 22 saw the US dollar
appreciate, finishing the quarter up 5.7% (proxied by the Dollar
Index). Gold continued to rally with spot prices up 22% from
June 1 to reach a record high of $1,888.7 per ounce on August 22
until price pullbacks during the mid-September sell-off
threatened its perceived status as a safe haven asset.
Commodities trended upwards early in the third quarter but sold
off sharply in August, returning -11.7% for the quarter and
-9.3% for the year (proxied by the S&P GSCI TR Index). HFP
Advisors generally maintained more cautious positioning and as a
result outperformed in both the third quarter and for the full
year 2011. GELS Advisors experienced the weakest performance, as
stock and sector selection were overwhelmed by macro concerns
during equity market declines. GFS broadly saw negative returns
throughout the summer and into early September, as credit was
also negatively impacted by macro headwinds. The Companys
outperformance was attributable to the large allocation to GTT
Advisors, who were able to capture correlated and sustained
moves in the direction of longer-term trends across many markets.
The Company cannot predict which Investment Sector and
accordingly which Investee will perform best in the future. The
table below illustrates the portfolio weighting of each material
Investee as of September 30, 2011, as well as each material
Investees net return for the three and nine months ended
September 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Weight
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
as a % of
|
|
|
September 30, 2011
|
|
|
September 30, 2011
|
|
Investee
|
|
Members
Equity(1)
|
|
|
Net
Return(2)
|
|
|
Net
Return(2)
|
|
|
GELS
|
|
|
39.29
|
%
|
|
|
(6.82
|
)%
|
|
|
(6.81
|
)%
|
GFS
|
|
|
25.25
|
%
|
|
|
(4.51
|
)%
|
|
|
(3.63
|
)%
|
GTT
|
|
|
31.47
|
%
|
|
|
1.55
|
%
|
|
|
1.63
|
%
|
|
|
|
(1)
|
|
Members equity, used in the
calculation of the fair value of the Investees as a percentage
of members equity, is reduced for member redemptions that
are paid after the balance sheet date according to ASC 480,
Distinguishing Liabilities from Equity.
|
|
(2)
|
|
These returns are based on the
performance of Class C Series 1 units for GELS,
GFS and GTT. The returns include administration fees. No
management fee or incentive allocation was charged by the
managing member of the Investment Funds with respect to the
Companys investment in any of the Investment Funds. Past
performance is not indicative of future results, which may vary.
|
31
For the three and nine months ended September 30, 2011, the
Companys Class A Series 1 units returned
(3.77)% and (4.28)%, respectively, net of fees and incentive
allocation.
The
Investees
The material Investees performance during the three and
nine months ended September 30, 2011 is described in the
following.
Goldman
Sachs Global Equity Long/Short, LLC
As of September 30, 2011, GELS represented approximately
39% of the Companys members equity. GELS returned
(6.82)% and (6.81)%, respectively, for Class C
Series 1 units for the three and nine months ended
September 30, 2011.
For the
Three Months Ended September 30, 2011
GELS Advisors generated broadly negative performance in the
third quarter of 2011, with performance driven by the steep
declines in global equity markets in July, August, and September.
GELS Advisors realized losses in all three months of the
quarter, most notably August and September, although in the
aggregate, performed better than equity markets with much lower
volatility. In the third quarter, there was a wide dispersion of
performance, with the magnitude of performance driven largely by
gross and net exposure levels, and to a lesser extent, sector
selection and single-stock exposures. GELS Advisors with long
exposure concentrated in financials or cyclical sectors such as
energy, industrials, materials, consumer cyclical and technology
underperformed during this period, while losses were more
limited for GELS Advisors with long exposures concentrated in
defensive sectors. Stock and sector selection were somewhat
marginalized by the continued dominance of macro factors on
equity markets in September and August, although this came after
what had proven to be a more fruitful period for stock-picking
in early July, as a strong earnings season generally rewarded
investors who judged company fundamentals effectively.
GELS Advisors returns were broadly in line with net
exposure levels, which decreased throughout the quarter. GELS
Advisors with high levels of portfolio net exposure were unable
to avoid the large market decline and realized some of the
largest losses in the quarter. Certain GELS Advisors with more
moderate net exposure combined with high levels of gross
exposure and large underlying sector, geography, and style
biases also realized challenging performance. Those GELS
Advisors with more neutrally or net short positioned portfolios
and those who adopted more cautious positioning in late July and
early August generally outperformed peers.
GELS Advisors exited the third quarter with substantially lower
levels of gross and net exposure compared to those at the start,
although risk levels were still well above the levels seen
during the financial crisis in 2008. With correlations and
volatility remaining high through the end of August and into
September, most GELS Advisors held exposure to the lower end of
their internal risk spectrums, awaiting a sustained period of
calm and greater macro certainty before meaningfully increasing
risk to take advantage of enticing valuations following
sell-offs. This has led GELS Advisors to reduce position sizes,
concentrate portfolios in their highest conviction positions,
and increase portfolio hedging, often leading to a decrease in
both gross and net exposure.
For the
Nine Months Ended September 30, 2011
GELS Advisors finished the first nine months of 2011 with
negative performance as gains generated during the first quarter
were erased by losses in the second and third quarters.
32
GELS Advisors had positive performance in the first quarter of
2011 with positive performance in January and February and more
muted performance in March. In January, GELS Advisors who had
higher levels of long exposure to the U.S., energy, industrials,
and technology sectors outperformed GELS Advisors with long
exposure to Asia and emerging markets, long positions in the
consumer sector, and short positions in European financials. In
February, GELS Advisors generally extended their January gains
supported by developed market equity performance.
Underperforming GELS Advisors generally had exposure to Asia and
emerging markets, as concerns about inflation tempered the
returns of emerging market equities. In March, U.S. and
emerging market focused GELS Advisors realized gains from long
exposure to cyclically-oriented sectors such as energy,
industrials and materials, while GELS Advisors with exposure to
Europe and Asia underperformed.
GELS Advisors generated negative performance in the second
quarter, as volatile markets and macroeconomic concerns created
a challenging environment for stock picking. GELS Advisors added
to their first quarter gains in April, as long exposures in
cyclically orientated sectors underperformed relative to more
stable sectors. In May, GELS Advisors who underperformed
generally had a growth bias to their portfolios and overweight
long exposure to commodities and industrials sectors, while top
performing GELS Advisors had long exposure to large cap equities
and defensive sectors such as healthcare and consumer staples.
GELS Advisors losses continued into June as underperforming GELS
Advisors significantly reduced exposures due to losses during
the first half of the month, causing them to have more limited
participation in the strong equity rally at the end of June.
In the third quarter, GELS Advisors realized losses in all three
months, most notably August and September, although in the
aggregate, performed better than equity markets with much lower
volatility. There was a wide dispersion of performance, with the
magnitude of performance driven largely by gross and net
exposure levels, and to a lesser extent, sector selection and
single-stock exposures. GELS Advisors with long exposure
concentrated in financials or cyclical sectors such as energy,
industrials, materials, consumer cyclical and technology
underperformed during this period, while losses were more
limited for GELS Advisors with long exposures concentrated in
defensive sectors. GELS Advisors returns were broadly in
line with net exposure levels, which decreased throughout the
quarter. GELS Advisors with high levels of portfolio net
exposure were unable to avoid the large market decline and
realized some of the largest losses in the quarter. Those GELS
Advisors with more neutrally or net short positioned portfolios
and those who adopted more cautious positioning in late July and
early August generally outperformed peers.
Goldman
Sachs Global Fundamental Strategies, LLC
As of September 30, 2011, GFS represented approximately 25%
of the Companys members equity. GFS returned (4.51)%
and (3.63)%, respectively, for Class C
Series 1 units for the three and nine months ended
September 30, 2011.
For the
Three Months Ended September 30, 2011
GFS Advisors experienced negative performance during the third
quarter of 2011, collectively realizing negative performance in
all three months of the quarter.
33
The third quarter was marked by significant volatility and
negative performance, driven by macro uncertainty largely
centered in Europe. During July, most multi-strategy GFS
Advisors experienced losses while the performance of
credit-focused GFS Advisors was mixed. The GFS Advisors who had
maintained relatively balanced positioning or shifted to a more
neutral portfolio typically fared better. Equity exposure,
particularly post-reorganization equities, contributed to
sizable losses. Bearish views on Europe generated positive
returns via short sovereign or single name European financial
CDS. In August, concerns about the solvency of European
sovereigns and banks along with a more muted global growth
outlook weighed on risk assets. Multi-strategy GFS Advisors
experienced losses, generally driven by their overall level of
directional exposure, with special situation equity positions
with high hedge fund ownership the biggest detractors. Credit
focused GFS Advisors largely generated negative performance in
August as well, with large markdowns in individual positions.
Detractors once again included post-reorganization equity
positions. Additionally, exposure to some large, distressed
capital structures detracted from performance as market
participants looking to reduce risk sold down exposures in these
more liquid names. Both multi-strategy and credit focused GFS
Advisors benefited from portfolio hedges, which offset some
losses. Despite a more muted start to performance in September
and intermittent relief rallies during the month, both credit
and equity markets were again impacted by broad risk aversion,
experiencing significant losses over the course of the month. In
September, credit focused GFS Advisors experienced losses,
although those with more balanced exposures and a
trading-oriented style fared better. Multi-strategy GFS Advisors
experienced losses across both credit and equity positions
during September despite general risk reduction in August. Some
GFS Advisors attempted to further hedge equity market exposure,
but many of these positions still resulted in losses during
September. Conversely, merger arbitrage exposure was generally a
small contributor in September as some deal spreads tightened
modestly following losses in August. Through the end of the
third quarter, GFS Advisors were generally more cautious than
they had been throughout most of the first half of 2011.
For the
Nine Months Ended September 30, 2011
GFS Advisors finished the first nine months of 2011 with
negative performance as gains generated during the first quarter
were offset by negative performance in the second and third
quarters.
The first quarter of 2011 began as a continuation of 2010 for
GFS Advisors and their portfolios, with the market environment
generally supportive of long positions in both equity and credit
markets. High yield and leveraged loan assets both finished the
first quarter in positive territory, and distressed credit
positions also largely performed well. Merger arbitrage
positions contributed to performance with increased activity
throughout the first quarter. Additionally, special situation
equities continued to generate positive returns due to a
combination of idiosyncratic developments and the supportive
market backdrop. In contrast, hedges were notable detractors
over the first quarter, although GFS Advisors with more balanced
positioning generally avoided significant losses in the middle
of March when volatility spiked. Overall, GFS Advisors
collectively realized positive performance in January and
February, while March saw high dispersion in performance of
underlying GFS Advisors given heightened market volatility.
The second quarter began with continued positive performance
from the first quarter. However, as negative data points on
global market conditions came to light, the positive backdrop
for GFS Advisors reversed in May, causing several GFS Advisors
to report negative performance during May and most GFS Advisors
to report negative performance during June. Losses in May were
largely driven by equity exposures, in contrast to credit
exposures which were generally more resilient to negative risk
sentiment during the month. In June, however, credit markets
experienced significant declines and equity markets continued to
sell off. While GFS Advisors experienced some recovery during
the last week of June given the sharp turnaround in the equity
markets, both equity and credit exposure contributed to losses
in June, leading to collectively negative performance from GFS
Advisors during the month and for the second quarter.
34
The third quarter was marked by significant volatility and
negative performance, driven by macro uncertainty largely
centered in Europe. GFS Advisors collectively realized negative
performance in all three months of the third quarter, generally
driven by their overall level of directional exposure. The GFS
Advisors who had maintained relatively balanced positioning or
shifted to a more neutral portfolio typically fared better over
the quarter. Equity exposure, particularly special situation
equity positions with high hedge fund ownership were the biggest
detractors. Post re-organized and levered equities also
contributed to sizable losses. Credit contributed to losses as
well, with large mark downs in individual positions despite
somewhat limited trading volume. Particularly, exposure to some
large, distressed capital structures detracted from performance
as market participants looking to reduce risk sold down
exposures in these more liquid names. Both multi-strategy and
credit focused GFS Advisors benefited from portfolio hedges,
which offset some losses. Bearish views on Europe generated
positive returns via short sovereign or single name European
financial CDS. Through the end of the third quarter, GFS
Advisors were generally more cautious than they had been through
most of the first half of 2011. Despite the cautious posture of
many portfolios, GFS Advisors highlighted the increased
opportunity set stemming from the recent market dislocation.
While the risk-reward trade-off had improved for a number of
investment opportunities, during the third quarter, GFS Advisors
were cognizant that markets remained vulnerable to further
selling pressure as broader market volatility and macro
uncertainty remained high.
Goldman
Sachs Global Tactical Trading, LLC
As of September 30, 2011, GTT represented approximately 31%
of the Companys members equity. GTT returned 1.55%
and 1.63%, respectively, for Class C
Series 1 units for the three and nine months ended
September 30, 2011.
For the
Three Months Ended September 30, 2011
Tactical Trading strategies generated positive performance in
the third quarter. Both macro GTT Advisors and managed futures
GTT Advisors exhibited fairly high dispersion through the
quarter, but overall contributed positively to performance. In
the aggregate, macro GTT Advisors outperformed managed futures
GTT Advisors, or commodity trading advisor (CTA)
strategies, as sharp trend reversals across key markets during
the quarter led to more significant declines for CTAs than for
macro GTT Advisors, which more tactically adjusted positioning.
In July, performance was positive as both macro GTT Advisors and
CTAs captured correlated and sustained moves in the direction of
longer-term trends across many markets, most notably in the
U.S. Dollar versus Asia and commodity-related currencies,
precious metals and fixed income markets. Trading in equities,
however, led to mixed performance in the month, as GTT
Advisors positioning was more varied. In August, macro GTT
Advisors and CTA strategies continued to benefit from trends in
fixed income as long positions in U.S. and non-peripheral
European government bonds benefited from a decline in yields.
Trading in precious metals also contributed gains, while CTA
strategies, and to a lesser extent macro GTT Advisors, suffered
in currency trading following the strengthening of the
U.S. Dollar. GTT Advisors experienced mixed performance in
September as losses from CTAs were offset by gains from macro
GTT Advisors. Most of September was again characterized by an
elevated level of investor risk aversion. The U.S. Dollar
continued to strengthen against emerging market currencies,
which led to losses for many GTT Advisors. However, both macro
GTT Advisors and CTAs largely offset these losses through gains
in fixed income trading, as yields continued to decline in
U.S. and non-peripheral European government bonds.
Commodities also detracted from performance, notably in energies
and precious metals, while performance in equities was mixed.
GTT Advisors generally continued to have long positioning in
fixed income, but became generally net short in equities in
September. GTT Advisors broadly have more mixed positioning in
both currencies and commodities. Risk levels for macro GTT
Advisors remained low to moderate, but generally increased over
the quarter, while risk levels for CTAs saw greater dispersion
but generally decreased through the quarter.
For the
Nine Months Ended September 30, 2011
Tactical trading strategies generated positive performance in
the first nine months of 2011 as positive returns generated by
macro GTT Advisors offset mixed, but overall negative returns
experienced by managed futures GTT Advisors.
35
GTT Advisors focused on macro trading generated positive returns
in the first nine months of 2011, as positive performance from
fixed income and to a lesser extent commodities trading offset
mixed performance in foreign exchange and equities. Trading in
fixed income contributed positively for nearly all macro GTT
Advisors, with profits generated largely in the first and third
quarters. With the exception of relatively sharp fixed income
reversals in the second quarter, yields on U.S. and German
government bonds have fairly steadily declined over the period.
In commodities, macro GTT Advisors have benefited primarily from
long precious metals and energy commodity positions held
consistently throughout the period. However, many macro GTT
Advisors gave up the majority of commodity gains in the third
quarter, following a strong sell-off across most commodity
markets. Foreign exchange positions have led to mixed and muted
results in the first nine months of 2011, as prior gains from
long positioning in non-Japan Asia, emerging market and
commodity-related currency positions sharply reversed in August
and September, while trading in other developed market
currencies, notably the Swiss Franc and Japanese Yen, has been
difficult for macro GTT Advisors over the period. GTT Advisors
focused on macro trading generally held low risk in equities
over the period, which led to muted and mixed performance.
During the first nine months of 2011, managed futures GTT
Advisors losses were driven by trading in currencies and
equities. Performance in emerging market and commodity-related
currencies was particularly challenging for managed futures GTT
Advisors. Trading in commodities resulted in mixed performance
for managed futures GTT Advisors, as risk exposure in the asset
class was lighter and positioning more mixed. Fixed income has
been the largest positive contributor for GTT Advisors focused
on managed futures, primarily due to strong performance in the
third quarter as long fixed income positioning benefited from
declining yields in both U.S. and non-peripheral European
government bonds.
Performance
for the Three and Nine Months Ended September 30,
2010
The Companys net realized and unrealized gain/(loss) for
the three and nine months ended September 30, 2010 was
$20,889,590 and $16,214,062, respectively, compared to the
Companys net realized and unrealized gain/(loss) for the
three and nine months ended September 30, 2009 of
$25,706,878 and $50,468,122, respectively.
Overview
Global markets broadly had a strong third quarter in 2010, as
risk assets rallied in July and September, more than offsetting
a softer month in August. This improvement came after a
challenging second quarter dominated by sovereign debt concerns
and weak economic data, as market sentiment was buoyed by
tentative signs of macro-economic improvement and strong
indications from the U.S. Federal Reserve that it would
embark on a second round of quantitative easing. The S&P
500 Index rose 10.7% over the third quarter, bringing its
2010 year-to-date
performance to 2.3%. In Europe, the FTSE EuroFirst 300 Index
rose 6.8% over the third quarter and also edged into positive
territory
year-to-date,
up 1.5%. Fixed income markets continued to rally following gains
earlier in 2010, while in currency markets the U.S. Dollar
was particularly weak, declining 11.4% against the Euro and 5.2%
against the British Pound. Credit markets performed relatively
well after the difficult second quarter of 2010, as the Credit
Suisse High Yield Index rose 6.0% and the S&P Leveraged
Loan 100 Index rose 4.1%, bringing
year-to-date
gains to 10.9% and 5.7% respectively. Commodity markets were
choppy, but during the third quarter of 2010 the S&P GSCI
Total Return Index rose 8.3%, recovering some earlier losses but
remaining in negative territory for 2010, down 3.9%. Volatility
levels picked up in August, but for the third quarter were down
markedly from levels seen in May and June, as the VIX Index
finished September at 23.7. Amid all this, HFP Advisors
generally performed well, generating gains in July and September
in particular to end the third quarter in positive territory.
However, high levels of correlation both between and within
asset classes and a choppy market environment continued to make
conditions challenging. Having been more defensively positioned
in the second quarter, many HFP Advisors cautiously increased
risk through the third quarter as these conditions showed some
signs of improvement, in many cases ending the third quarter
with positive returns on a
year-to-date
basis.
36
The table below illustrates the portfolio weighting of each
Investee as of September 30, 2010 as well as each
Investees net return for the three and nine months ended
September 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Weight
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
as a % of
|
|
|
September 30, 2010
|
|
|
September 30, 2010
|
|
Investee
|
|
Members
Equity(1)
|
|
|
Net
Return(2)
|
|
|
Net
Return(2)
|
|
|
GELS
|
|
|
39.49
|
%
|
|
|
3.94
|
%
|
|
|
(0.50
|
)%
|
GFS
|
|
|
24.33
|
%
|
|
|
2.19
|
%
|
|
|
6.76
|
%
|
GFS Trust
|
|
|
4.56
|
%
|
|
|
(0.41
|
)%
|
|
|
(2.27
|
)%
|
GTT
|
|
|
28.71
|
%
|
|
|
5.16
|
%
|
|
|
5.74
|
%
|
|
|
|
(1)
|
|
Members equity, used in the
calculation of the fair value of the Investees as a percentage
of members equity, is reduced for member redemptions that
are paid after the balance sheet date according to ASC 480,
Distinguishing Liabilities from Equity.
|
|
(2)
|
|
These returns are based on the
performance of Class C Series 1 units for GELS,
GFS, and GTT and GFS Trust interests for GFS Trust. The returns
include administration fees. No management fee or incentive
allocation was charged by the managing member of the Investment
Funds with respect to the Companys investment in any of
the Investees. Past performance is not indicative of future
results, which may vary.
|
For the three and nine months ended September 30, 2010, the
Companys Class A Series 1 units returned
3.06% and 1.60%, respectively, net of fees and incentive
allocation.
The
Investees
The material Investees performance during the three and
nine months ended September 30, 2010 is described in the
following.
Goldman
Sachs Global Equity Long/Short, LLC
As of September 30, 2010, GELS represented approximately
39% of the Companys members equity. GELS returned
3.94% and (0.50)%, respectively, for Class C
Series 1 units for the three and nine months ended
September 30, 2010.
For the
Three Months Ended September 30, 2010
GELS Advisors experienced positive performance during the third
quarter of 2010, producing positive performance in July and
September, while realizing a small loss in August.
In July and September, GELS Advisors generated gains as they
benefited from broad based rallies in global equities. GELS
Advisors realized the largest gains from long exposure to the
sectors most sensitive to global growth, which included the
industrials, materials, commodities/energy, and consumer
discretionary sectors. Short exposure in nearly all sectors and
general market hedges were responsible for the majority of
losses. During the July and September rallies, GELS Advisors
generally underperformed relative to equity market indices as
they had adopted more conservative positioning entering the
third quarter in response to the market declines of May and June
and the increase in macroeconomic uncertainty. Top performing
GELS Advisors generally had the most aggressive net exposure
positioning, while select GELS Advisors also outperformed due to
strong stock picking. However, a number of GELS Advisors found
alpha generation difficult as they were overweight less
economically sensitive sectors such as healthcare and consumer
staples which underperformed and underweight more economically
sensitive sectors such as consumer discretionary and industrials
which outperformed. Additionally, historically high levels of
stock correlations created a challenging environment for stock
picking.
During August, GELS Advisors conservative positioning
proved beneficial and the GELS Advisors who underperformed in
July and September generally outperformed peers. While, as a
group, GELS Advisors experienced negative performance in August,
the loss was only a fraction of the declines of global equity
indices as GELS Advisors were able to generate alpha relative to
equity indices from both long exposure and short exposure. GELS
Advisors who outperformed in August had more neutral exposure
positioning and generated attractive long/short performance
spreads by limiting losses from long exposure and generating
gains from short exposure in the consumer discretionary, retail,
technology, and financial sectors.
37
GELS Advisors had broadly adopted conservative positioning in
anticipation of an economic slowdown in the second half of 2010
and 2011. As a result GELS Advisors had increased short exposure
to economically sensitive sectors such as consumer and
technology, focused their long portfolios in high conviction
names with stable, visible earnings outlooks, and maintained
more conservative balance sheets. Additionally, GELS Advisors
maintained liquid portfolios so they could actively manage
exposure as new macroeconomic data emerges and market sentiment
changes.
For the
Nine Months Ended September 30, 2010
GELS Advisors finished the first nine months of 2010 with
negative performance as gains generated during the third
quarter, particularly in July and September, were not able to
recoup the losses from May and June.
During the first quarter of 2010, GELS Advisors realized roughly
flat performance as losses in January were offset by gains in
February and March. In January equity markets declined globally
and GELS Advisors with higher levels of net and long exposure
concentrated in emerging markets, technology, media/telecom, and
select financials and resources/energy positions experienced
some of the largest declines. Conversely, during February and
March global equity markets appreciated which guided GELS
Advisors towards positive performance. In particular, GELS
Advisors benefited from relatively net long positioning and long
exposure to a broad range of sectors including financials,
consumer discretionary, industrials/materials, energy,
technology, and healthcare.
The strong positive trend of equity markets at the end of the
first quarter of 2010 reversed in the second quarter of 2010,
leading to losses for GELS Advisors. GELS Advisors realized
slight negative performance in April as gains from long exposure
in a number of sectors, including the consumer, industrials,
energy, financials, and technology sectors, were offset by
losses from long exposure in the healthcare and materials
sectors, while short positions also proved costly, particularly
those in higher beta/more cyclical sectors. During May and June,
unsurprisingly GELS Advisors losses were largely from long
positions, with the greatest losses coming from higher beta
names in sectors such as resources, industrials, materials,
technology, financials, and consumer discretionary. Short
positions and hedges were broadly the only source of gains and
partially offset long book losses.
In the third quarter GELS Advisors realized positive
performance; however, they failed to fully capture the strong
performance of equity markets as they had reduced risk levels
following the increase in volatility and macroeconomic
uncertainty in May and June. In July and September GELS Advisors
generated gains as they benefited from broad based rallies in
global equities, realizing the largest gains from long exposure
to the industrials, materials, commodities/energy, and consumer
discretionary sectors. Short exposure in nearly all sectors and
general market hedges were responsible for the majority of
losses. During August, GELS Advisors conservative
positioning proved beneficial as GELS Advisors experienced a
loss that was only a fraction of the declines of global equity
indices. GELS Advisors who outperformed in August had more
neutral exposure positioning and generated attractive long/short
performance spreads by limiting losses from long exposure and
generating gains from short exposure in the consumer
discretionary, retail, technology, and financial sectors.
Goldman
Sachs Global Fundamental Strategies, LLC
As of September 30, 2010, GFS represented approximately 24%
of the Companys members equity. GFS returned 2.19%
and 6.76%, respectively, for Class C
Series 1 units for the three and nine months ended
September 30, 2010.
38
For the
Three Months Ended September 30, 2010
GFS Advisors experienced positive performance during the third
quarter of 2010, with positive performance in July, August, and
September.
The third quarter of 2010 began with thematic extensions of the
second quarter, as GFS Advisors continued to produce a wide
dispersion of returns, driven by their portfolio positioning and
exposure management. The market backdrop improved as clarity on
the European sovereign debt situation and U.S. financial
regulatory reform emerged. Throughout the third quarter, GFS
Advisors maintained defensive portfolio postures through the use
of cash, short positions and portfolio hedges. The market
volatility during the summer months provided GFS Advisors with
opportunities to take profits on long positions, close out short
positions at a profit and establish new entry points in
securities that sold-off during market downdrafts. Throughout
the third quarter, high yield issuance remained strong and was
met with equally strong demand from yield-seeking investors.
Credit-focused GFS Advisors generated modest returns during the
third quarter as prices continued to appreciate. GFS Advisors
with higher allocations to event-oriented or post-reorganization
equities generated positive performance in July and September,
but underperformed in August. During the third quarter, GFS
Advisors running more balanced portfolios generated consistently
positive but more muted returns relative to those with a higher
allocation to equities. Multi-strategy GFS Advisors broadly
generated positive performance throughout the third quarter,
driven largely by investments in special situation equities.
Short investments and market overlay hedges were net detractors
of performance over the third quarter, although those positions
helped offset losses during August.
With increases in clarity around policy-making and the
likelihood of a second round of quantitative easing (QE2),
market volatility and risk aversion abated incrementally toward
the end of the third quarter. Additionally, with the resurgence
of activity in mergers and acquisitions, multi-strategy GFS
Advisors began to redeploy capital toward merger arbitrage while
continuing to reduce high yield credit exposure.
For the
Nine Months Ended September 30, 2010
GFS Advisors experienced positive performance in the first nine
months of 2010.
GFS Advisors produced positive returns over the course of the
first quarter of 2010, despite some volatility driven by the
push for financial reform in Washington and deteriorating
economic conditions in Europe. GFS Advisors benefitted not only
from strength in the broader markets, but also from returns
driven by developments in company specific, event-driven
situations. For multi-strategy GFS Advisors, while credit
continued to be a source of positive attribution, activities in
merger arbitrage and special situation equity investing proved
accretive to returns for many. Throughout the first quarter,
while portfolio hedges minimized return volatility relative to
the broader credit and equity markets, they generally detracted
from performance as markets moved higher.
The second quarter of 2010 initially began as a continuation of
positive performance from the first quarter, driven by credit
investments benefitting from a strong technical backdrop as well
as several positive company-specific developments. However, as
global market conditions continued to deteriorate, the positive
backdrop for GFS Advisors began to reverse in May, causing
several GFS Advisors to report negative performance during May
and June. Additionally, multi-strategy GFS Advisors throughout
the first six months of 2010 had been slowly deploying capital
away from high yield credit names and toward special situations
equities. As such, multi-strategy GFS Advisors generally
reported negative returns over the second quarter given the
volatility and underperformance of equity markets. However, some
multi-strategy GFS Advisors generated small gains as they
positioned their portfolios with various hedges that contributed
meaningfully to positive attribution throughout the second
quarter.
39
Similarly, the third quarter of 2010 began with thematic
extensions of the second quarter, as GFS Advisors continued to
produce a wide dispersion of returns, driven by their portfolio
positioning and exposure management. The market backdrop
improved as clarity on the European sovereign debt situation and
U.S. financial regulatory reform emerged. Throughout the
third quarter, GFS Advisors maintained defensive portfolio
postures through the use of cash, short positions and portfolio
hedges. The market volatility during the summer months provided
GFS Advisors with opportunities to take profits on long
positions, close out short positions at a profit and establish
new entry points in securities that sold-off during market
downdrafts. GFS Advisors with higher allocations to
event-oriented or post-reorganization equities generated
positive performance in July and September, but underperformed
in August. During the third quarter, GFS Advisors running more
balanced portfolios generated consistently positive but more
muted returns relative to those with a higher allocation to
equities. Multi-strategy GFS Advisors broadly generated positive
performance throughout the third quarter, driven largely by
investments in special situation equities. Short investments and
market overlay hedges were net detractors of performance over
the third quarter, although those positions helped offset losses
during August.
Goldman
Sachs Global Fundamental Strategies Asset Trust
As of September 30, 2010, GFS Trust represented
approximately 5% of the Companys members equity. GFS
Trust returned (0.41)% and (2.27)%, respectively, for GFS Trust
interests for the three and nine months ended September 30,
2010.
On March 31, 2009, GFS transferred to GFS Trust its
interests in certain illiquid investments, including illiquid
investments made by Advisor Funds, as well as liquidating
vehicles that the Advisors formed as liquidity decreased for
previously liquid investments, such as certain credit
instruments. GFS transferred to GFS Trust the economic risks and
benefits of its interests in the assets. In connection with such
transfer, each investor in GFS, including the Company, was
issued its pro-rata share of GFS Trust interests based on its
ownership in GFS as of the transfer date. Distributions from GFS
Trust in respect of GFS Trust interests will be made to holders
of GFS Trust interests, including the Company, as amounts in
respect of the assets transferred to GFS Trust are received from
the advisors. However, the actual timing of these distributions
will be dependent on the Advisors ability to liquidate
positions as market conditions allow, and it could be a
significant period of time before such positions are realized or
disposed of. See ITEM 2. MANAGEMENTS DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS Liquidity and Capital Resources.
Goldman
Sachs Global Tactical Trading, LLC
As of September 30, 2010, GTT represented approximately 29%
of the Companys members equity. GTT returned 5.16%
and 5.74%, respectively, for Class C
Series 1 units for the three and nine months ended
September 30, 2010.
For the
Three Months Ended September 30, 2010
Tactical trading strategies experienced positive performance in
the third quarter of 2010 as both managed futures and macro
strategies generated gains. After negative performance in July,
performance was positive in both August and September despite
the differing market environments. Long fixed income exposures
across macro and managed futures GTT Advisors drove positive
performance in the third quarter, with consistently positive
performance in July and August. Fixed income positions detracted
from returns in early September, but then made back some of
their losses as bonds rallied into the September month-end in
anticipation of further quantitative easing from the Fed.
Currency trading generated mixed results during the third
quarter, as short Euro positions detracted early in the quarter,
but by the end of the third quarter a consensus short
U.S. Dollar position contributed to performance. The
U.S. Dollar index declined 8.5% during the third quarter.
Long positions in Asian and other emerging market currencies
also contributed to performance. Equity positioning was
relatively limited in macro strategies at the start of the third
quarter, but a general long bias across macro and managed
futures strategies contributed positively to performance in
September after detracting in August. Trading in commodities was
challenging at the beginning of the third quarter, but by
September trading activity had increased and positions were
profitable. Notably, long gold positions contributed as the
precious metal increased 5.0% during the third quarter. Also,
several GTT Advisors benefited from large moves in agricultural
commodities, as the price of wheat increased 45.0% during the
third quarter and the price of corn increased 39.9% during the
same period.
40
For the
Nine Months Ended September 30, 2010
Tactical trading strategies experienced positive performance in
the first nine months of 2010 as both macro GTT Advisors and
managed futures GTT Advisors contributed positively to
performance.
GTT Advisors trading macro strategies generated gains that were
roughly split between fixed income and currencies, with a
slightly positive contribution from commodities and modest
losses from equities. Trading in fixed income continued to
contribute to macro GTT Advisors performance as yields
generally moved lower during the period. Currency trading also
contributed to performance, helped by short Euro positions
during the first six months of 2010 and also by short
U.S. Dollar positions during the third quarter. After
detracting during the first six months of the year, trading in
equities produced mixed results for macro GTT Advisors in the
third quarter, as discretionary macro GTT Advisors generally
continued to struggle but systematic macro GTT Advisors profited
from a sustained long bias. In commodities, macro GTT
Advisors long gold positions benefited as the yellow metal
gained close to 20% during the first nine months of the year.
GTT Advisors trading managed futures strategies experienced
mixed, but overall positive performance, with a high degree of
dispersion across GTT Advisors. Generally, fixed income and
currencies were strong contributors while equities and
commodities detracted from managed futures GTT Advisors. Trading
in interest rates drove positive performance in managed futures
GTT Advisors during the first nine months of the year, as long
positions benefited from declining interest rates. Currency
trading also contributed as managed futures GTT Advisors
benefited from the Euros move lower and the Australian
Dollars moves higher. Trading in equities generated mixed
results in the first nine months of 2010, as longer-term trend
followers struggled but short-term managed futures GTT Advisors
saw more success in the asset class. Trading in commodities
detracted from returns during the first nine months of the year,
especially in the energy complex. Some commodities-focused
managed futures GTT Advisors generated strong performance from
long positions in the grains complex.
Comparison
of Selected Financial Information for the Three and Nine Months
ended September 30, 2011 and September 30,
2010
Dividend
Income
Dividend income for the three and nine months ended
September 30, 2011 was $684 and $6,037, respectively,
compared to dividend income for the three and nine months ended
September 30, 2010 of $7,398 and $15,669. The
Companys dividend income fluctuates with the level of cash
available to invest.
Expenses
The management fee for the three and nine months ended
September 30, 2011 was $1,808,099 and $5,709,730,
respectively, compared to the management fee for the three and
nine months ended September 30, 2010 of $1,938,587 and
$5,814,568, respectively. Because the management fee is
calculated as a percentage of the Companys net assets as
of each month end (equal to one-twelfth of 1.25% of the net
assets of the Company of the applicable month), the changes in
the expense were due to fluctuations in the Companys net
assets for the period ended September 30, 2011 compared to
the same period in 2010.
Effective November 1, 2010, the Companys credit
facility matured and was not renewed. The Company had no
interest expense for the three and nine months ended
September 30, 2011. Interest expense for the three and nine
months ended September 30, 2010 was $86,122 and $153,105,
respectively.
Professional fees for the three and nine months ended
September 30, 2011 were $366,246 and $631,271,
respectively, compared to professional fees for the three and
nine months ended September 30, 2010 of $121,990 and
$636,418, respectively. The increase in professional fees for
the three months ended September 30, 2011 was primarily due
to increased costs related to the additional regulatory filing
requirement of adopting Extensible Business Reporting Language
(XBRL). The professional fees for the nine months
ended September 30, 2011 remain relatively unchanged from
the nine months ended September 30, 2010 as professional
fees had decreased in the first half of 2011 from the prior year.
41
Effective August 1, 2010, the Company incurs a monthly
administration fee payable to SEI equal to one twelfth of 0.02%
of the net assets of the Company as of each month end. The
administration fee for the three and nine months ended
September 30, 2011 was $35,805 and $111,983, respectively.
Miscellaneous expenses for the three and nine months ended
September 30, 2011 were $45,773 and $139,281, respectively,
compared to miscellaneous expenses for the three and nine months
ended September 30, 2010 of $43,331 and $120,198,
respectively.
Incentive
Allocation
Incentive allocation for the three and nine months ended
September 30, 2011 was $0 and $5,323, respectively,
compared to incentive allocation for the three and nine months
ended September 30, 2010 of $80,979 and $82,592. The change
in incentive allocation for the three and nine months ended
September 30, 2011 from the three and nine months ended
September 30, 2011 was due to the fluctuation in net income
from operations for the period for certain series of
class A shares that were above their high water mark.
Other than the management fee, interest expense, professional
fees, administration fee, miscellaneous expenses and incentive
allocation, there are no other fees directly borne by the
Company.
Liquidity
and Capital Resources
The Companys liquidity requirements consist of cash needed
to fund investments in the Investment Funds in accordance with
the Companys investment strategy, to fund quarterly
redemptions and to pay costs and expenses. The Company
periodically re-allocates its investments in the Investment
Funds based on the performance of the Investment Funds and other
factors. Redemptions are permitted on a quarterly basis and
written notices of redemption must be delivered to the Company
at least 91 days prior to the applicable valuation date,
which is the day immediately preceding the applicable redemption
date. Accordingly, the Company cannot predict the level of
redemptions in the Company for any quarterly period until
91 days prior to the redemption date. The Company endeavors
to pay redemption proceeds within 45 days following the
redemption date, without interest. If the Company faces a
liquidity problem, the redemptions may be limited or postponed
under certain limited circumstances. The Managing Members
ability to limit or postpone redemptions in the Company enables
the Company to control and to some extent avoid a liquidity
problem. However, substantial redemptions of units in the
Company could require the Company to liquidate certain of its
investments in the Investment Funds in order to raise cash to
fund the redemptions, which could have a material adverse effect
on the NAV of the units and the performance of the Company.
42
The Company can fund its liquidity requirements by liquidation
(through redemptions, or as otherwise permitted in the limited
liability company agreements of the Investment Funds) of its
investments in the Investment Funds and from new investments
from existing and new investors. Neither GFS Trust nor GRV
provide investors with a voluntary redemption right. Redemptions
can be made quarterly, subject to certain limitations. During
certain historic periods, the Company only took in investments
from existing investors and limited subscriptions from new
qualified investors; however, the Company has been accepting
additional amounts of new subscriptions throughout the first
three quarters of 2011. The Company may close again and stop
accepting subscriptions at any time without notice at the sole
discretion of the Managing Member. The acceptance of future
subscriptions in the Company and the continued growth of the
Company will be determined by the Managing Member in its sole
discretion. Although the Managing Member has been receiving new
subscriptions, any liquidity requirements in the near term may
need to be funded through the redemption of existing investments
in the Investment Funds to the extent new investments are not
received in sufficient amounts to cover redemptions. If the
Company seeks to redeem all or a portion of its investment
positions in any of the Investment Funds, the Investment Fund,
to the extent it does not have cash on hand to fund such
redemption, will need to liquidate some of its investments.
Substantial redemptions of membership units in an Investment
Fund, including by the Company, could require the Investment
Fund to liquidate certain of its investments more rapidly than
otherwise desirable in order to raise cash to fund the
redemptions and achieve a market position appropriately
reflecting a smaller asset base. This could have a material
adverse effect on the value of the membership units redeemed and
the membership units that remain outstanding and on the
performance of the Investment Fund. Under certain exceptional
circumstances, such as force majeure, the managing member of an
Investment Fund (currently, the Managing Member) may find it
necessary (a) to postpone redemptions if it determines that
the liquidation of investments in the Investment Fund to fund
redemptions would adversely affect the NAV per membership unit
of the Investment Fund or (b) to set up a reserve for
undetermined or contingent liabilities and withhold a certain
portion of redemption proceeds. In such circumstances, the
Investment Fund would likely postpone any redemptions.
Certain investment positions in which the Investment Funds have
a direct or indirect interest are illiquid. The Advisors may
invest in restricted or non-publicly traded securities,
securities on foreign exchanges and futures. These positions may
be illiquid because certain exchanges limit fluctuations in
certain securities and futures contract prices during a single
day by regulations referred to as daily price fluctuation
limits or daily limits. Under such daily
limits, during a single trading day no trades may be executed at
prices beyond the daily limits. Once the price of a particular
security or futures contract has increased or decreased by an
amount equal to the daily limit, positions in that security or
contract can neither be taken nor liquidated unless traders are
willing to effect trades at or within the limit.
In addition, certain of the investments held by the Investment
Funds are subject to various
lock-up
provisions. Additionally, the Advisors of the investments held
by the Investment Funds may, at their discretion, transfer a
portion of the Investment Funds investment into share
classes where liquidity terms are directed by the Advisor in
accordance with the respective investments private
placement memorandum, commonly referred to as side pocket share
classes (side pockets). These side pockets may have
restricted liquidity and prohibit the Investment Funds from
fully liquidating their investments without delay. The managing
member of each Investment Fund attempts to determine each
Advisors strategy on side pockets through its due
diligence process prior to making an allocation to the
investment managed by the Advisor. However, no assurance can be
given on whether or not the Advisor will implement side pockets
during the investment period. The Advisors of the investments
held by the Investment Funds may also, at their discretion,
suspend redemptions or implement other restrictions on liquidity
which could impact the Investment Funds ability to meet
redemptions submitted by the Company. As of September 30,
2011, approximately 2% of the Companys investments in the
Investees were considered illiquid due to restrictions
implemented by the Advisors of the investments held by
Investees, excluding contractual restrictions imposed by the
Advisors at the time of purchase, such as
lock-ups. In
addition, as of September 30, 2011, approximately 3% of the
Companys members equity was considered illiquid due
to restrictions implemented by the Investees including the lack
of a voluntary redemption right from GFS Trust and GRV.
43
GS HFS, the managing member of GFS, created GFS Trust for the
benefit of its investors, including the Company. Goldman Sachs
Trust Company, a Delaware Corporation, is the trustee of
GFS Trust (the Trustee). The Trustee appointed GS
HFS as the Special Assets Direction Advisor,
responsible for, among other things, disposition of GFS Trust
assets. On March 31, 2009, GFS transferred to GFS Trust its
interest in certain illiquid investments, including illiquid
investments made by Advisor Funds, as well as liquidating
vehicles that the Advisors formed as liquidity decreased for
previously liquid investments, such as certain credit
instruments. GFS transferred to GFS Trust the economic risks and
benefits of its interests in the assets. In connection with such
transfer, each investor in GFS, including the Company, was
issued its pro-rata share of GFS Trust interests based on its
ownership in GFS as of the transfer date. Distributions from GFS
Trust in respect of GFS Trust interests will be made to holders
of GFS Trust interests, including the Company, as amounts in
respect of the assets transferred to GFS Trust are received from
the Advisors. However, the actual timing of these distributions
will be dependent on the Advisors ability to liquidate
positions as market conditions allow, and it could be a
significant period of time before such positions are realized or
disposed of.
The Company received subscriptions from new and existing
investors of $3,875,000 and $22,970,000, respectively during the
three and nine months ended September 30, 2011 and of
$7,237,258 and $59,298,042, respectively, during the three and
nine months ended September 30, 2010.
Demand from new and existing investors varies from period to
period based upon market conditions, the Companys returns
and other alternative investments available to investors. The
Company believes that in more recent periods investors
interest has decreased from earlier periods as investors have
sought to decrease overall portfolio exposure.
The Company paid out redemptions in the amount of $22,053,852
and $70,058,148, respectively, during the three and nine months
ended September 30, 2011 and $18,974,200 and $57,445,038,
respectively, during the three and nine months ended
September 30, 2010. The Company had redemptions payable in
the amount of $28,190,214 at September 30, 2011 and
$18,895,114 at December 31, 2010. The Company funded the
redemptions made in 2010 and in January, April and July 2011 by
making redemptions from the Investment Funds in proportion to
the then current weightings and through the use of uninvested
cash on hand. The Managing Member expects the Company to fund
future redemptions in a similar manner and does not believe that
the Redemptions payable in October 2011 had a material adverse
effect on the value of the units or the performance of the
Company.
Demand for redemptions varies from period to period based upon
market conditions, the Companys returns and other
alternative investments available to investors.
The Company and each Investment Fund may, but are not required
to, borrow from (including through direct borrowings, borrowings
through derivative instruments, or otherwise) The Goldman Sachs
Group, Inc. or its affiliates, including Goldman,
Sachs & Co. (collectively referred to herein, together
with their affiliates, directors, partners, trustees, managers,
members, officers and employees, as the GS Group),
or other parties, when deemed appropriate by its managing
member, including to make investments and distributions in
respect of redemptions of membership units, to pay expenses or
for other purposes.
As of September 30, 2011, the Company had cash and cash
equivalents on hand of 33,241,310. As of December 31, 2010,
the Company had cash and cash equivalents on hand of $29,949,410.
Investments as of September 30, 2011 were $537,649,525 as
compared to $612,687,074 as of December 31, 2010. The
decrease was primarily due to net redemptions made by the
Company from the Investment Funds and net realized and
unrealized losses on Investments in affiliated Investees during
the nine months ended September 30, 2011.
Management fee payable represents the management fees due to the
Managing Member. Management fee payable as of September 30,
2011 was $1,808,099 as compared to $1,322,217 as of
December 31, 2010. Because the management fee is calculated
as a percentage of the Companys net assets as of each
month end, the liability related to management fees will
fluctuate based on the fluctuation of the month end NAV of the
Company. The increase in Management fee payable is due to the
amount and timing of the payment of the monthly management fee
to the Managing Member and fluctuations in the NAV.
44
The Company generally expects that its cash flows from
liquidating its investment positions in the Investment Funds, to
the extent necessary, and from new subscriptions into the
Company are adequate to fund its operations and liquidity
requirements.
The value of the Companys directly held cash and financial
instruments is not expected to be materially affected by
inflation. At the Investee level, given that GFSs Advisors
seek to profit from price movements and can take both positive
and negative views on the drivers of such movements, their
outlooks may include a view on the direction of inflation, with
the outcome of their trades derived, at least in part, from the
accuracy of such a view. No first-order endemic effects from
inflation, as may exist in long-only bond portfolios, are
expected. Further, extended changes in inflation may be
associated with strong up or down trends in interest rates,
creating a favorable environment for GTTs Advisors, and
therefore contributing to the Companys profit potential.
However, unexpected changes in inflation can also give rise to
rapid reversals in interest rate markets, creating an
environment in which such Advisors, and the Company, potentially
may suffer losses. The impact of changes in inflation on equity
long/short strategies used by GELS Advisors is difficult
to predict and depends upon how large the change is in both
absolute terms and relative to expectations. A sharp increase in
inflation could hurt certain sectors, such as regional banks,
homebuilders, and autos, while sharp downward moves could be
beneficial for equities. If a downward move were too large,
however, it could give rise to concerns about deflation. In all
cases, however, the Company endeavors to take inflation, and its
possible effects on each of the Investment Funds, into account
when it develops its investment strategies.
Recent
Accounting Pronouncements
Improving Disclosures about Fair Value Measurements
(Accounting Standards Codification (ASC)
820). In January 2010, the Financial Accounting
Standards Board (FASB) issued Accounting Standards
Update (ASU)
No. 2010-06,
Fair Value Measurements and Disclosures (Topic
820) Improving Disclosures about Fair Value
Measurements. ASU
No. 2010-06
provides amended disclosure requirements related to fair value
measurements. Certain disclosure requirements of ASU
No. 2010-06
were effective for the Company beginning in the first quarter of
2010, while other disclosure requirements of the ASU are
effective for financial statements issued for reporting periods
beginning after December 15, 2010. Since these amended
principles require only additional disclosures concerning fair
value measurements, adoption did not and will not affect the
Companys financial condition, results of operations or
cash flows.
Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and International Financial
Reporting Standards (IFRS) (FASB ASC 820).
In May 2011, the FASB issued ASU
No. 2011-04,
Fair Value Measurements and Disclosures (Topic
820) Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and
IFRS. ASU
No. 2011-04
clarifies the application of existing fair value measurement and
disclosure requirements, changes certain principles related to
measuring fair value, and requires additional disclosures about
fair value measurements. ASU
No. 2011-04
is effective for periods beginning after December 15, 2011.
The Company is currently evaluating the impact of adoption.
Critical
Accounting Policies and Estimates
Use of
estimates
The discussion and analysis of the Companys financial
condition and results of operations are based on the
Companys financial statements, which have been prepared in
accordance with U.S. GAAP, which require the Managing
Member to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Actual results may differ from those estimates. The financial
statements are expressed in U.S. dollars. A summary of the
Companys significant accounting policies is set forth in
Note 2 to the Companys financial statements. In the
Managing Members view, the policy that involves the most
subjective judgment is set forth below.
45
Fair
value of investments
The Companys investments in Investees are subject to the
terms and conditions of the operating agreements of the
respective Investees. These investments are carried at fair
value, based on the Companys attributable share of the net
assets of the respective Investee. The fair value of a financial
instrument is the amount that would be received to sell an asset
or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
U.S. GAAP has a three-level fair value hierarchy for
disclosure of fair value measurements. The fair value hierarchy
prioritizes inputs to the valuation techniques used to measure
fair value, giving the highest priority to Level 1 inputs
and the lowest to Level 3 inputs. A financial
instruments level in the fair value hierarchy is based on
the lowest level of any input that is significant to its fair
value measurement.
The Company uses NAV as its measure of fair value for
investments in Investees. In evaluating the level at which the
fair value measurements of the Companys investments have
been classified, the Company has assessed factors including, but
not limited to, price transparency, the ability to redeem at NAV
at the measurement date and the existence or absence of certain
restrictions at the measurement date. See Note 4 to the
Companys financial statements.
At September 30, 2011 and December 31, 2010,
approximately 99% of the fair value of the Companys
pro-rata share of investments in the Investees was determined
predominantly from utilizing NAVs provided by external advisors.
At September 30, 2011 and December 31, 2010,
investments valued using quoted market prices represented
approximately 1% of the fair value of the Companys
pro-rata share of investments in the Investees. GTT was the only
Investee that held investments that utilized quoted market
prices to determine fair value.
Valuations generally are made based on information the Company
or the Investees, as applicable, receive from the Advisors. This
information is generally not audited, except at year-end, and
could prove to be inaccurate due to inadvertent mistakes,
negligence, recklessness or fraud by the Advisors. The Company
receives preliminary and final NAVs from each of the Investees
on a monthly basis. Historically, the Company has not
experienced any material variance between the preliminary and
final NAVs, which would have required adjustment to the
Companys financial statements. If the Managing Member
determines that any such valuation may be inaccurate or
incomplete, the Managing Member may determine the fair value of
the asset based on information available to, and factors deemed
relevant by, the Managing Member at the time of such valuation.
Generally, however, neither the Company nor the Investees will
receive independent valuations with respect to the assets
managed by Advisors and will not in many cases be able to
conduct any independent valuations on their own or to cause any
third parties to undertake such valuations. In addition,
valuations of illiquid securities and other investments are
inherently uncertain and may prove to be inaccurate in
hindsight. These risks are more fully described in the
Companys
Form 10-K
for the year ended December 31, 2010 (the
Form 10-K).
The valuation provisions of the Companys limited liability
company agreement and the limited liability company agreements
of the Investment Funds provide the Managing Member with greater
flexibility to more accurately value the Companys assets
(for purposes of subscriptions, redemptions and fees) in
circumstances where the Managing Member has information
available to it indicating that a valuation may be inaccurate or
incomplete, although generally, as described above, the Managing
Member will not have access to independent valuations and will
rely on valuations provided by the Advisors. Valuations are
performed in a substantially similar manner for GFS Trust.
However, where such information does exist, the Managing Member
will be entitled to apply its authority to more accurately
reflect the Companys value. Accordingly, to the extent
that the Managing Member determines that a valuation provided by
an Advisor may be inaccurate or incomplete, the additional
flexibility on the Companys valuation practices is
designed to make the Companys valuations more accurate.
For example, to the extent an Advisor has allocated assets to an
Advisor Fund that has provided the Company with a valuation
report indicating a positive valuation, but the Managing Member
is aware that the Advisor Fund has filed for bankruptcy, the
Managing Member will be able to take the bankruptcy into account
to attempt to more accurately determine the fair value of such
assets.
46
There has been no situation during the periods contained in this
Quarterly Report on
Form 10-Q
where the impact of an adjustment to a valuation provided by an
Advisor or independent investment manager at an Investee was
material to the Company in which one of the Investees had
invested was not complete or was inaccurate.
Off-Balance
Sheet Risk
In the normal course of business, the Advisors of the Advisor
Funds may trade various financial instruments and enter into
various investment transactions with off-balance sheet risk,
which includes, but are not limited, to securities sold short,
futures, forwards, swaps and written options. There are no
off-balance sheet or material contingent liabilities at the
Company or Investee levels.
Contractual
Obligations
The Company does not have any long-term debt obligations,
capital or operational lease obligations or other long-term debt
liabilities.
47
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
The following table lists the significant market risk sensitive
instruments held by the Company, through the Investees, as of
September 30, 2011 and as of December 31, 2010, as
indicated by the Fair Value/Value at Risk column, and the Net
Realized and Unrealized Gain/(Loss) from January 1, 2011 to
September 30, 2011 and from January 1, 2010 to
December 31, 2010. Because of the uncertain nature of the
investments that the Company engages in through the Investees,
the Managing Member believes the entire portfolio value of the
Company is at risk. The Managing Member is unable to track the
impact of market volatility, credit and interest rate risk on
the units because in many cases it does not receive information
on individual investments made by Advisors or their aggregate
holdings and so is not in a position to track such risks on an
aggregate basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2011
|
|
|
|
|
|
|
|
|
|
Net Realized
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
and Unrealized
|
|
|
|
|
|
|
Members
|
|
|
Fair Value/Value
|
|
|
Gain/(Loss)
|
|
|
|
|
Investee
|
|
Equity(1)
|
|
|
at Risk
|
|
|
(In millions)
|
|
|
Liquidity
|
|
|
GELS
|
|
|
39.29
|
%
|
|
$
|
212,222,540
|
|
|
$
|
(15.4
|
)
|
|
|
(2
|
)
|
GFS
|
|
|
25.25
|
%
|
|
|
136,347,003
|
|
|
|
(5.1
|
)
|
|
|
(3
|
)
|
GFS Trust
|
|
|
3.18
|
%
|
|
|
17,167,960
|
|
|
|
(0.9
|
)
|
|
|
(4
|
)
|
GTT
|
|
|
31.47
|
%
|
|
|
169,959,496
|
|
|
|
2.8
|
|
|
|
(5
|
)
|
GRV
|
|
|
0.23
|
%
|
|
|
1,245,229
|
|
|
|
(0.2
|
)
|
|
|
(6
|
)
|
HFPO
|
|
|
0.13
|
%
|
|
|
707,297
|
|
|
|
(0.0
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
99.55
|
%(8)
|
|
$
|
537,649,525
|
|
|
$
|
(18.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 30, 2010
|
|
|
|
|
|
|
|
|
|
Net Realized
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
and Unrealized
|
|
|
|
|
|
|
Members
|
|
|
Fair Value/Value
|
|
|
Gain/(Loss)
|
|
|
|
|
Investee
|
|
Equity(1)
|
|
|
at Risk
|
|
|
(In millions)
|
|
|
Liquidity
|
|
|
GELS
|
|
|
39.98
|
%
|
|
$
|
248,593,542
|
|
|
$
|
9.1
|
|
|
|
(2
|
)
|
GFS
|
|
|
25.30
|
%
|
|
|
157,347,212
|
|
|
|
12.8
|
|
|
|
(3
|
)
|
GFS Trust
|
|
|
3.73
|
%
|
|
|
23,188,415
|
|
|
|
0.1
|
|
|
|
(4
|
)
|
GTT
|
|
|
29.14
|
%
|
|
|
181,173,125
|
|
|
|
15.9
|
|
|
|
(5
|
)
|
GRV
|
|
|
0.27
|
%
|
|
|
1,649,094
|
|
|
|
0.1
|
|
|
|
(6
|
)
|
HFPO
|
|
|
0.12
|
%
|
|
|
735,686
|
|
|
|
(0.1
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
98.54
|
%(8)
|
|
$
|
612,687,074
|
|
|
$
|
37.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Members equity, used in the
calculation of the investments as a percentage of members
equity, is based on the members equity per the Balance
Sheet and in accordance with ASC 480, Distinguishing
Liabilities from Equity.
|
|
(2)
|
|
Redemptions can be made quarterly
with 61 days notice, or at the sole discretion of the
Managing Member.
|
|
(3)
|
|
Redemptions can be made quarterly
on or after the first anniversary of the initial purchase of the
units with at least 91 days notice, or at the sole
discretion of the Managing Member.
|
|
(4)
|
|
GFS Trust does not provide
investors with a voluntary redemption right. Pursuant to the
terms of the trust agreement for GFS Trust, distributions will
be made to holders of interests in GFS Trust as GFS Trust
receives proceeds in respect of its Advisors. The estimated
remaining holding period of its remaining underlying investments
range from one to six years.
|
|
(5)
|
|
Redemptions can be made quarterly
with 60 days notice, or at the sole discretion of the
Managing Member.
|
|
(6)
|
|
GRV ceased its trading activities
effective on July 1, 2009 and will dissolve at the time all
assets are liquidated, liabilities are satisfied and liquidation
proceeds are distributed through payment of a liquidating
distribution. GRV suspended redemptions pending the completion
of the liquidation proceedings. The estimated remaining holding
period of its remaining underlying investments range from one to
six years.
|
|
(7)
|
|
HFPOs current holdings
consist solely of one illiquid investment in an Advisor Fund,
which cannot be redeemed until the relevant Advisor liquidates
such investment. The estimated remaining holding period of the
illiquid investment is approximately two to five years.
|
|
(8)
|
|
The total value of the
Companys investment in the Investees was less than 100% of
members equity because members equity reflected cash
and cash equivalents greater than total liabilities.
|
48
Risk
Management
In the ordinary course of business, the Managing Member,
including in its capacity as managing member of the Investment
Funds, attempts to manage a variety of risks, including market,
credit and operational risk. The Managing Member, including in
its capacity as managing member of the Investment Funds,
attempts to identify, measure and monitor risk through various
mechanisms including risk management strategies and credit
policies. These include monitoring risk guidelines and
diversifying exposures across a variety of instruments, markets
and counterparties.
Market risk is the risk of potential significant adverse changes
to the value of financial instruments because of changes in
market conditions such as interest rates, foreign exchange
rates, equity prices, credit spreads, liquidity and volatility
in commodity or security prices. The Managing Member, including
in its capacity as managing member of the Investment Funds,
monitors its exposure to market risk at both the Advisor and
portfolio level through various analytical techniques. At the
Advisor level, market risk is monitored on a regular basis.
Where position level detail is available, the Managing Member,
including in its capacity as managing member of the Investment
Funds, monitors its exposure to market risk through a variety of
analytical techniques, including
Value-at-Risk
(VaR) and scenario analysis (stress testing). VaR is
calculated for each Advisor using a Monte Carlo simulation with
a one-year look back period. The Managing Member looks at VaR
over a
one-day
horizon at the 95% and 99% confidence intervals. As of
September 30, 2011, the Managing Member had full position
level transparency for approximately 51% (as a percentage of
fair value investments) of the Advisors in which the Company
invests through the Investment Funds. To determine position
level transparency, the Company uses a list containing all
Advisors for whom the Company received position level details,
whether or not the Advisors also provided pricing information
for those positions. The Company believes that knowing its
transparency on the position level details of its Advisors
provides meaningful information about its underlying investments
in its Advisors whether or not the Company also has transparency
on the pricing information for these positions and therefore
will continue to use such methodology for conveying information
regarding the Companys position level transparency in
future quarters. The Managing Member believes that the VaR
assumptions it utilizes are reasonable given that VaR is only
one determinant in the Managing Members overall risk
management. Where position level detail is unavailable, an
Investment Fund relies on risk reports provided by the Advisors
as well as through open communication channels with Advisors,
which generally includes site visits and monthly conference
calls. The Companys maximum risk of loss is limited to the
Companys investment in the Investment Funds. The risks
involved are more fully described in the Companys
Form 10-K.
The managing member of the Investment Funds monitors Advisors to
prevent style drift. Style drift is defined as
Advisors changing their investment style from the Investment
Funds expectations. Where position level detail is
available, the managing member of the Investment Funds monitors
leverage against predetermined limits. Position sizing limits
are also monitored to ensure Advisors are properly diversified
and risk normally is not concentrated in one or relatively few
positions. In some cases, the managing member of the Investment
Funds also has the ability to monitor approved trading
instruments to ensure Advisors are not trading securities
outside their mandate. Where position level detail is not
available, the managing member of the Investment Funds relies on
both written and oral Advisor communications. The risks involved
are more fully described in the Companys
Form 10-K.
At the Companys portfolio level, the Companys
portfolio construction process is designed to provide for
adequate diversification. Each Investment Fund is a portfolio of
approximately
10-30
underlying Advisors and the managing member of each of the
Investment Funds regularly reviews portfolio statistics, such as
relative contribution to risk, to confirm that risk is not
concentrated in any single Advisor. The managing member of GFS,
in its sole discretion, may determine from time to time the
number of Advisors with which GFS invests based on factors such
as the amount of GFSs assets under management, the
availability of attractive opportunities, and other portfolio
construction considerations. Any such greater concentration with
any single Advisor or in any single investment strategy may
entail additional risks. The risks involved are more fully
described in the Companys
Form 10-K.
49
Quantitative analysis is combined with judgment to determine
weightings, strategic return, risk and correlation estimates to
inform the quantitative analysis. Judgment is applied to both
estimates and weights in an attempt to achieve exposure to hedge
funds while delivering attractive risk-adjusted returns. The
approximate weights of the material Investees were 39% GELS, 25%
GFS and 31% GTT as of September 30, 2011 as a percentage of
members equity. The approximate weights of the material
Investees were 40% GELS, 25% GFS and 29% GTT as of
December 31, 2010 as a percentage of members equity.
This portfolio construction process is designed to create a
diversified hedge fund portfolio with attractive return and risk
characteristics.
The Managing Member may, from time to time, vary or change
materially the actual allocation of assets made by the Company,
as it deems appropriate in its sole discretion, including
without limitation by way of allocation of Company assets to any
new Investment Fund or Advisor, complete or partial withdrawal
of an allocation from any existing Investment Fund or Advisor, a
reallocation of assets among existing Investment Funds or
Advisors, or any combination of the foregoing. In carrying out
any reallocation of Company assets, the Managing Member will
have the sole discretion to determine the manner of such
reallocation, including from which Investment Funds or Advisors
to withdraw assets and to which Investment Funds or Advisors to
allocate assets. Any reallocation of Company assets, for
purposes of diversification, attempts to meet target allocations
or otherwise, may take a significant period of time to implement
due to the liquidity provisions and restrictions of the
Investment Funds and the Advisors and for other reasons. There
can be no assurance that market or other events will not have an
adverse impact on the strategies employed by multiple Investment
Funds and Advisors. Investment Funds and Advisors may at certain
times hold large positions in a relatively limited number of
investments. The Company could be subject to significant losses
if an Investment Fund or an Advisor holds a large position in a
particular investment that declines in value that cannot be
liquidated without adverse market reaction or is otherwise
adversely affected by changes in market conditions or
circumstances. While the Managing Member currently expects to
allocate assets to all the Investment Sectors (other than
relative value) through allocations to the Investment Funds, the
Managing Member has no constraints with respect to the
percentage of the Companys assets to be allocated,
directly or indirectly, to any single Advisor, group of
Advisors, Investment Fund, or Investment Sector, or with respect
to the number of Investment Funds and Advisors to which,
directly or indirectly, assets of the Company are allocated at
any time. The percentage of the Companys assets to be
allocated to any single Advisor, group of Advisors, Investment
Fund or Investment Sector, and the number of Investment Funds
and Advisors to which the Company allocates assets from time to
time will be determined by the Managing Member in its sole
discretion, based on factors deemed relevant by the Managing
Member at the time of such allocation, which may include the
amount of the Companys assets under management,
constraints on the capital capacity of the Investment Funds and
Advisors, the availability of attractive opportunities, and
other portfolio construction and portfolio management
considerations.
The Company invests in the Investment Funds, and may from time
to time redeem its membership units of the Investment Funds.
Neither GFS Trust nor GRV provide investors with a voluntary
redemption right. The Investment Funds, in turn, maintain
relationships with counterparties that include the Advisors.
These relationships could result in concentrations of credit
risk. Credit risk arises from the potential inability of
counterparties to perform their obligations under the terms of
the contract, including, in the case of the Companys
investments in the Investment Funds, the potential inability of
an Investment Fund to satisfy its redemption obligations. The
managing member of the Investment Funds (currently, the Managing
Member) has formal credit-review policies to monitor
counterparty risk.
In addition to market risk and credit risk, the Managing Member,
including in its capacity as managing member of the Investment
Funds, allocates resources to mitigate operational risk.
Operational risk is the potential for loss caused by a
deficiency in information, communication, transaction
processing, settlement and accounting systems. The Managing
Member, including in its capacity as managing member of the
Investment Funds, maintains controls and procedures for the
purpose of mitigating its own operational risk but it does not
have control over the systems of the Advisors. In addition, the
Managing Member, including in its capacity as managing member of
the Investment Funds, deploys resources to assess control
systems, legal risk, compliance risk, operations and treasury
risk, credit risk, accounting risk and reputational risk.
Fraud and other business risks cannot be eliminated; however,
the Managing Member, including in its capacity as managing
member of the Investment Funds, seeks to significantly reduce
such risks. The portfolio risk management process includes an
effort to monitor and manage risk, but should not be confused
with and does not imply low risk.
50
There can be no assurance that the Managing Member, including in
its capacity as managing member of the Investment Funds, will be
able to implement its risk guidelines or that its risk
monitoring strategies will be successful.
|
|
Item 4.
|
Controls
and Procedures
|
As of the end of the period covered by this report, an
evaluation was carried out by the board of directors of the
Company, with the participation of the principal executive
officer and principal financial officer (or persons performing
similar functions) of the Managing Member, of the effectiveness
of the design and operation of the Companys disclosure
controls and procedures (as defined in
Rule 13a-15(e)
under the Securities Exchange Act of 1934, as amended (the
Exchange Act)). Based on that evaluation, the
Companys principal executive officer and principal
financial officer (or persons performing similar functions)
concluded that the Companys disclosure controls and
procedures were effective as of the end of the period covered by
this report. In addition, no change in the Companys
internal control over financial reporting (as defined in
Rule 13a-15(f)
under the Exchange Act) occurred during the most recent fiscal
quarter that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over
financial reporting.
PART II
OTHER INFORMATION
|
|
Item 1.
|
Legal
Proceedings
|
There are no material pending legal proceedings to which the
Company or the Managing Member is a party or to which any of
their assets are subject.
None.
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
From January 1, 2011 to September 30, 2011, aggregate
subscriptions totaled $22,970,000. Details of the sale of the
series of units are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class and
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Series of
|
|
|
Number of
|
|
|
Number of
|
|
|
Subscription
|
|
Date of Sale
|
|
Units
|
|
|
Units Sold
|
|
|
Investors
|
|
|
Amount
|
|
|
January 1, 2011
|
|
|
Class A Series 91
|
|
|
|
39,500.00
|
|
|
|
8
|
|
|
$
|
3,950,000
|
|
February 1, 2011
|
|
|
Class A Series 92
|
|
|
|
26,500.00
|
|
|
|
8
|
|
|
|
2,650,000
|
|
March 1, 2011
|
|
|
Class A Series 93
|
|
|
|
18,250.00
|
|
|
|
5
|
|
|
|
1,825,000
|
|
April 1, 2011
|
|
|
Class A Series 94
|
|
|
|
39,200.00
|
|
|
|
7
|
|
|
|
3,920,000
|
|
May 1, 2011
|
|
|
Class A Series 95
|
|
|
|
46,500.00
|
|
|
|
10
|
|
|
|
4,650,000
|
|
June 1, 2011
|
|
|
Class A Series 96
|
|
|
|
21,000.00
|
|
|
|
5
|
|
|
|
2,100,000
|
|
July 1, 2011
|
|
|
Class A Series 97
|
|
|
|
17,000.00
|
|
|
|
3
|
|
|
|
1,700,000
|
|
August 1, 2011
|
|
|
Class A Series 98
|
|
|
|
11,250.00
|
|
|
|
4
|
|
|
|
1,125,000
|
|
September 1, 2011
|
|
|
Class A Series 99
|
|
|
|
10,500.00
|
|
|
|
4
|
|
|
|
1,050,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
229,700.00
|
|
|
|
54
|
|
|
$
|
22,970,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The units were sold at $100.00 per unit. The sale was not
subject to any underwriting discount or commission. The units
were privately offered and sold to accredited investors pursuant
to Rule 506 of Regulation D and the sales were exempt
from registration under the Securities Act of 1933.
51
Pursuant to the Companys limited liability company
agreement, holders of units may redeem their units upon
91 days prior written notice to the Managing Member
(unless such notice is waived by the Managing Member in its sole
discretion), on each January 1, April 1, July 1 or
October 1 occurring on or after the first anniversary of the
purchase of such units by the holder (each a
Redemption Date). Units of a particular series
will be redeemed at a per unit price based upon the NAV of such
series as of the close of business on the day immediately
preceding the Redemption Date (taking into account the
allocation of any net appreciation or depreciation in the net
assets of the Company for the accounting period then ending),
after reduction for any management fee and incentive fee and
other liabilities to the extent accrued or otherwise
attributable to the units being redeemed. The Company paid out
redemptions of $22,053,852 during the three months ended
September 30, 2011.
|
|
Item 3.
|
Defaults
Upon Senior Securities
|
Not applicable.
|
|
Item 5.
|
Other
Information
|
On November 8, 2011, Jennifer Barbetta notified the Company
that, effective November 15, 2011 she will no longer serve
as Chief Financial Officer of the Managing Member.
Ms. Barbetta will remain a Managing Director of the
Managing Member and will continue to support the Managing Member
in a variety of capacities. On November 8, 2011, Helen
Crowley was appointed Chief Financial Officer of the Managing
Member by the board of directors of the Managing Member,
effective November 15, 2011.
This
Form 10-Q
contains certain forward-looking statements
regarding the operation of the Company and the Companys
investment objective, including, among other things:
|
|
|
|
|
investment strategies and allocations of assets;
|
|
|
|
future performance;
|
|
|
|
the Companys liquidity position; and
|
|
|
|
trends in the Investment Sectors.
|
Forward-looking statements are typically identified by the use
of terms such as may, will,
should, expect, intend,
plan, anticipate, estimate,
believe, continue, predict,
potential or the negative of such terms and other
comparable terminology. These statements are only predictions
and are not historical facts. Actual events or results may
differ materially.
The forward-looking statements included herein are based on the
Managing Members current expectations, plans, estimates
and beliefs that involve numerous risks and uncertainties.
Assumptions relating to the foregoing involve judgments with
respect to, among other things, future economic, competitive and
market conditions and future business strategies and decisions,
all of which are difficult or impossible to predict accurately
and many of which are beyond the Companys control. Any of
the assumptions underlying the forward-looking statements
contained herein could be inaccurate and, therefore, the
Managing Member of the Company cannot assure Members that the
forward-looking statements included in this
Form 10-Q
will prove to be accurate.
In light of the significant uncertainties inherent in the
forward-looking statements included in this
Form 10-Q,
the inclusion of such information should not be regarded as a
representation by the Company or the Managing Member that the
investment objective set forth in this
Form 10-Q
will be achieved. The Company cautions Members that
forward-looking statements are not guarantees and that the
actual results could differ materially from those expressed or
implied in the forward-looking statements.
52
In addition to the risks identified in our
Form 10-K,
which is incorporated herein by reference, the following list
indicates some of the risks that could impact the likelihood
that any forward-looking statements will come true:
|
|
|
|
|
There can be no assurance that the Managing Members
decisions regarding risk allocations will be successful;
inaccurate information provided by the Advisors may have a
material adverse effect on implementing the Companys
investment objective;
|
|
|
|
The Managing Member generally has limited access to information
on or control over Advisors portfolios and Members assume
the risk that Advisors may knowingly misrepresent information
which could have a material negative impact on the Company
materially;
|
|
|
|
The Company faces legal, tax and regulatory risks that may
adversely affect the Company;
|
|
|
|
Units will not be listed and will not be marketable; the Company
is a closed-end fund with limited liquidity and limited rights
for redemption; substantial redemptions could have a material
adverse effect on the Company;
|
|
|
|
The fee structure of the Company, including compensation
arrangements with the Managing Member and the Advisors of the
Investment Funds, may create incentives for the Managing Member,
the Investment Funds or the Advisors to make riskier investments
or to inflate returns;
|
|
|
|
Past performance of affiliated funds and of Advisors are not
necessarily indicative of the results that the Company and any
Investee may achieve or of future results;
|
|
|
|
Valuation of the Investees investments will be based upon
valuations provided by the Advisors which are generally not
audited; uncertainties in valuations could have a material
adverse effect on the Companys net assets;
|
|
|
|
Advisor redemption holdbacks and other Advisor liquidity
restrictions may adversely affect the Investment Funds
ability to redeem interests in order to meet redemption
requests, which could have an adverse effect on the
Companys portfolio mix and liquidity for remaining Members;
|
|
|
|
Frequent trading and turnover typically result in high
transaction costs and the Investment Funds have no control over
this turnover;
|
|
|
|
Allocation of the Companys assets may not protect the
Company from exposure to economic downturns in any Investment
Fund or Investment Sector;
|
|
|
|
An investment in the Company involves a high degree of risk that
the entire amount invested may be lost; investment results may
vary substantially over time;
|
|
|
|
A Members investment in the Company will be affected by
the investment policies and decisions of Advisors which are
outside the Companys control; the Advisors may be unable
to or may choose not to seek to achieve their investment goals;
Advisors may not be able to locate suitable investment
opportunities;
|
|
|
|
Certain Advisors may invest in private equity investments and
real estate investments which involve a high degree of business
and financial risk and may be difficult to value;
|
|
|
|
Transactions between and among funds may be undervalued and
negatively affect the Companys performance;
|
|
|
|
The ability of an Investment Fund to hedge successfully will
depend on the particular Advisors ability to predict
pertinent market movements which cannot be assured;
|
|
|
|
The prices of an Investees investments can be highly
volatile and influenced by external factors outside the control
of such Investee;
|
|
|
|
International investments may involve special risks not usually
associated with investments in U.S. securities, including
higher risk of financial irregularities
and/or lack
of appropriate risk monitoring and controls;
|
53
|
|
|
|
|
Equity securities and equity-related instruments may be subject
to various types of risk, including market risk, liquidity risk,
counterparty credit risk, legal risk and operations
risk; and
|
|
|
|
The issuers of securities acquired by Advisors will sometimes
face a high degree of business and financial risk.
|
The foregoing list of factors is not exhaustive. Investors
should carefully consider the foregoing factors and the other
uncertainties and potential events described in the
Form 10-K.
The Company or the Managing Member does not undertake to update
any forward-looking statement, whether written or oral, that may
be made from time to time by the Managing Member of the Company
or the Company or on their behalf.
References to market or composite indices, benchmarks or other
measures of relative market performance are provided for
Investors information only. Reference to an index does not
imply that the portfolio will achieve results similar (or
dissimilar) to that index.
54
|
|
|
|
|
Number
|
|
Description
|
|
|
31
|
.1
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31
|
.2
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32
|
.1
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
55
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
GOLDMAN SACHS HEDGE FUND
PARTNERS, LLC
(Registrant)
|
|
|
|
By:
|
Goldman Sachs Hedge Fund Strategies, LLC
Managing Member
|
|
|
By:
|
/s/ Jennifer
Barbetta
|
Name: Jennifer Barbetta
|
|
|
|
Title:
|
Chief Financial Officer, Managing Director
|
Date: November 14, 2011
56
Index to
Exhibits
|
|
|
|
|
Number
|
|
Description
|
|
|
31
|
.1
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31
|
.2
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32
|
.1
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
57