Goldman Sachs plans to cut AM investments

Goldman Sachs Group’s asset management division is reportedly planning to significantly reduce the $59 billion of alternative investments that have been weighing on the bank’s earnings.

The bank plans to divest its positions over the next few years and replace some of those funds on its balance sheet with outside capital. The bank will provide more details on its asset plan during Goldman Sachs’ investor day on February 28th, where it will unveil its new strategy for the division.

Alternative assets can include private equity, real estate, or hedge funds, which are often more complex and illiquid than traditional assets, making them more difficult to value and manage. Additionally, they can also be more volatile, which can make them more risky for a bank’s earnings. By divesting these alternative investments, Goldman Sachs aims to reduce volatility in its earnings and align its portfolio with the current market conditions.

Goldman Sachs’ asset and wealth management division posted a 39% decline in net revenue to $13.4 billion in 2022, with its revenue from equity and debt investments sinking 93% and 63%, respectively, according to its earnings announced last week.

The $59 billion of alternative investments held on the balance sheet fell from $68 billion a year earlier, the results showed. The bank’s new strategy for its asset management division is part of a broader effort to streamline its operations and focus on more profitable areas of the business. This move is expected to help Goldman Sachs to maintain its competitive edge and continue delivering strong returns for its shareholders.