Sept. 17 (Bloomberg) -- Goldman Sachs Group Inc.'s Global Equity Opportunities hedge fund lost 1.8 percent in the first week of September, extending the slide that led to last month's $3 billion cash injection.

Global Equity, with $7.5 billion in assets, fell 23 percent in August, its steepest monthly decline, as rising credit costs roiled stock markets, said two Goldman investors. The firm, the second-largest U.S. hedge-fund manager, shored up the investment pool after it dropped 30 percent in the first two weeks of last month. The decline for the month through Sept. 7 compared with a 1.3 percent decrease by the Standard & Poor's 500 Index.

Goldman pumped $2 billion into Global Equity and lined up $1 billion from investors including Maurice ``Hank'' Greenberg, the former chairman of American International Group Inc., and billionaire Eli Broad. August also was the worst month for Goldman's Global Alpha hedge fund, once the New York-based firm's biggest, which fell 22.5 percent and received $1.6 billion of redemption notices.

``People aren't going to keep suffering losses,'' said Brett Barth, a partner at New York-based BBR Partners, which invests in hedge funds. ``These funds are supposed to do well with risk management. Something has gone badly awry.''

Goldman managers -- Robert Jones at Global Equity, and Mark Carhart and Raymond Iwanowski at Global Alpha -- use computer models to determine what securities to trade and when. Other so- called quantitative managers fared better. James Simons's $29 billion Renaissance Institutional Equities made up the 8.7 percent that it lost in the first eight trading days of August.

Industry Slump

Hedge funds fell 1.31 percent on average last month, the worst monthly performance since May 2006, data compiled by Chicago-based Hedge Fund Research Inc. show. The U.S. benchmark Standard & Poor's 500 Index returned 1.5 percent.

Andrea Raphael, a Goldman spokeswoman, declined to comment.

Global Equity is designed to be market-neutral, meaning the manager bets on shares he expects to rise and fall. Jones had borrowed about $6 for every $1 of assets in early August to amplify returns.

``That's a lot of leverage for a market-neutral equity fund,'' said Kevin Smith, who runs quant funds at Crescat Portfolio Management LLC in Golden, Colorado.

Goldman officials said when they announced the cash infusion that Jones has reduced Global Equity's borrowing ratio to 3.5.

Global Equity, started in May 2003, rose about 16 percent in both 2004 and 2005, according to the investors, who declined to be identified. It fell 4 percent last year. Global Equity is marketed to investors as being less volatile than Global Alpha. Prior to last November, the biggest monthly price swing was about 5 percent, compared with Global Alpha's 20 percent.

History of Returns

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets and participate substantially in profits from money invested. The industry oversees more than $1.7 trillion.

New York-based JPMorgan Chase & Co. is the largest U.S. hedge-fund firm, managing $56.2 billion as of July 1, according to HedgeFund Intelligence's Absolute Return magazine. Goldman oversees $40 billion, the magazine said.

To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net

Last Updated: September 17, 2007 10:24 EDT