Recall that four years ago, Goldman Sachs arranged for its clients to invest $3.5 billion with ESL Investments, run by Ed Lampert, among the hottest hedge fund managers at the time.

Goldman Sachs put its own skin in the game and invested $75 million on a proprietary basis. Unfortunately, the investment proved a dud in 2011 as the fund suffered mightily thanks to an outsized investment in Sears, whose stock fell more than 50 percent in the year. So far this year, the stock has recovered to the point that Goldman Sachs and other investors are now in the money on their ESL investment. Unfortunately, they cannot redeem their shares in the fund until the end of this year, according to the lock up agreement.

So for Goldman Sachs anyway, there’s a lot of drama left. It's unclear whether they hit a home run with the ESL play or not. While Sears has been on fire so far this year, the big gains may prove temporary. There have long been rumors that the company would be taken private. My sense is that investors will not redeem en masses, as the long-term performance of the fund has been solid. But it goes to show that not everyone who takes advantage of a special offer by Goldman Sachs will automatically end up a winner, even when the investment seems like a can’t-miss opportunity, like ESL Investments back in 2008 or more recently Facebook.

For Goldman Sachs, the fees are lucrative no matter what happens to the investment itself, though as a show of good faith it nice to invest alongside customers.

For more:
- here’s the article from the Tribune

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