Goldman Sachs surprised most analysts with its second quarter earnings report. The bank survived an overall decline in trading revenue – 10% in fixed income and 13% in equities – with a rather impressive investment banking performance. But there was another unit within that firm did much of the heavy lifting, just without all the fanfare.
With more than $1 trillion in assets, Goldman’s investment management business, a unit that took a beating during the financial crisis, appears well back on its feet. The business generated $1.4 billion in revenue during Q2, up 8% year-over-year.
Now that doesn’t match the 15% increase seen in investment banking, but that’s not really the point. Goldman Sachs, like some other Wall Street banks before it, is positioning its investment management unit as “the centerpiece of its growth strategy,” according to a Reuters report based on interviews with current and former Goldman staffers and clients.
The business, which saw significant outflows following the financial crisis, has since stemmed the tide, receiving $61 billion in net long-term inflows so far this year, according to the report. Part of that turnaround is surely do to the fading memory of what happened five years ago, but Goldman has also been much more active, acquiring seven businesses and doing plenty of hiring. The unit now has 5,000 front-office employees, with plans to continue adding to its ranks.
"We certainly want the business to be bigger in every metric – revenues, pretax, performance statistics," said group co-head Tim O’Neil.
Is Goldman pulling a Morgan Stanley, ditching most of its high-risk, high-reward businesses for the calm waters of asset management? Certainly not. But the unit is clearly becoming a bigger part of Goldman’s business.
It’s difficult to call a bank’s results “overrated” when it sees a 43% decrease in profit, but the one main highlight that came out of Bank of America’s second quarter results were its FICC numbers. In reality, they weren’t all that great.
We’ve spoken to recruiters specializing in asset management, private equity and hedge funds to give you an idea of what’s available on the buy-side right now.
Time Warner rejected an $80 billion offer from Fox that would have united two media giants. While the talks are said to be dormant, it just shows how big M&A could be this year. Enormous deals are being talked about. Oh, and one options trader cashed in seven-figures on the speculation.
Prudential has hired Michael Schlachter from Wilshire Associates as the head for its newly created Multi-Asset Class Solutions group. Schlachter is set to hire to fill out the group, which caters to institutional investors.
Banks are literally throwing money at experienced compliance pros, but working with more responsibility is taking its toll on those now on the front lines. Burnout is already happening.
Former CalPERS CEO Fred Buenrostro has acknowledged some fraud. Lots and lots of fraud. Highlights include taking kickbacks like $200,000 in cash stuffed into shoeboxes and having someone else pay for his entire wedding.
If you want to work at a hedge fund, keep your ID badge accessible. At Citadel, for example, you’ll need to swipe it five times before getting to your desk.
Buzz Around the Office
Male executives have cursed 254 times during analyst calls. Only one woman has – former Yahoo CEO Carol Bartz. Overall, executives are showing more restraint on earnings calls, which historically coincides with strong economic data.
Quote of the Day: “Basically, when you get to my age, you’ll really measure your success in life by how many of the people you want to have love you actually do love you. I know people who have a lot of money, and they get testimonial dinners and they get hospital wings named after them. But the truth is that nobody in the world loves them. If you get to my age in life and nobody thinks well of you, I don’t care how big your bank account is, your life is a disaster.” – Warren Buffett