The $59 billion in alternative investments that have been a burden on Goldman Sachs’ revenues will be reduced significantly by the bank’s asset management division, Reuters reported on Monday. Over the coming years, Goldman Sachs intends to liquidate its holdings and replace some of the funds on its balance sheet with external funding, as revealed by Julian Salisbury, the chief investment officer of asset and wealth management at Goldman Sachs, during an interview with the agency. He said that the bank would go into more detail about its asset plan during Goldman Sachs’ investor day on 28 February. In contrast to traditional investments like stocks and bonds, alternative assets comprise private equity and real estate.
Goldman’s fourth-quarter performance was extremely disappointing. It missed Wall Street profit targets by a huge margin. Goldman is laying off more than 3,000 staff in its largest wave of job cuts since the 2008 financial crisis, joining other banks in mass layoffs as corporate deal-making slows down.
According to its earnings released this week, Goldman Sachs’ asset and wealth management had a 39 percent reduction in net revenue to $13.4 billion in 2022, with its revenue from debt and equity investments falling 63 percent and 93 percent, respectively.
The results showed that the value of alternative investments maintained on the balance sheet decreased to $59 billion from $68 billion a year earlier. Along with additional transactions, the positions totaled $15 billion in equity investments, $19 billion in lending, and $12 billion in debt securities.
However, given the weak capital markets, customers seem to be quite interested in private credit, according to Salisbury. In order to invest junior debt in companies with private equity backing, the asset management division of Goldman Sachs closed a $15.2 billion fund earlier this month.
According to data source Preqin, the value of private credit assets throughout the sector has more than doubled to over $1 trillion since 2015. Additionally, investors are developing an interest in private equity funds and are searching for opportunities to purchase shares on the secondary market when current investors have been selling their shares.