Goldman Sachs’ Principal Strategic Investments (PSI) group is not new to the scene. The venture capitalist-style investment team was formed all the way back in 1999, the same year Goldman went public. But the 28-person group has recently taken on a heightened level of importance as CEO David Solomon attempts to spread the firm’s focus well beyond trading and dealmaking.
A CNBC expose on the “secretive tech fund” reveals one fact that should make traditional VCs take notice. Goldman’s PSI team, which has invested $1.5 billion in 76 companies, has generated returns north of 25% for each of the last seven years. The unit, led by partner Darren Cohen, is 50% female and combines to speak 14 different languages. They are safely tucked away behind locked doors on the sixth floor of Goldman’s Manhattan headquarters.
The focus of PSI gives credence to its newfound status within the company. The team invests mostly in early-stage technology companies, particularly fintech startups. What makes the unit different than traditional VCs is that it looks for more than just opportunities for strong returns; it also targets companies and technologies that can help Goldman run its business while also providing greater visibility over the fintech market.
We “ask what are the investments we need to make to help accelerate the firm’s transition to the next evolution of our business?” Cohen told CNBC. “As a function of solving these problems well, a by-product is the companies we pick become very successful.” Recent investments include electronic trading market Tradeweb, developer platform GitLab and data analytics firm Crux. With the launch of Marcus, Goldman’s online consumer bank, PSI also began investing more in the consumer banking space where it previously lacked footing.
What’s interesting about PSI is that the team is not just strategically investing from afar. Goldman Sachs typically takes a seat on the company’s board and connects the startup with internal groups and its customers that would use the product – almost acting as a marketing or sales lead. While neither Goldman or CNBC mentioned this other possible advantage, big banks will often make investments in startups with the hope of setting themselves up for future business when the company matures, including offering debt and equity underwriting and M&A services.
One other point worth mentioning is that Goldman appeared to go out of its way to make the highly-secretive tech fund…much less of a secret. Cohen and his main deputy, fellow partner named Rana Yared, went on the record with CNBC and Quartz over the last six weeks to talk up the team and detail what is has accomplished. Typically, Goldman would be happy to generate 25% annual returns with no coverage or fanfare. Perhaps its media strategy is evolving under new CEO David Solomon. – Or maybe Goldman is just looking for some good publicity as it bullies for space in business lines that aren’t considered its bread-and-butter. Either way, the 28-person team seems like a safe place to be working with all the changes that are happening at Goldman.
Elsewhere, former UBS investment banking chief Andrea Orcel sat down with the FT to discuss what life has been like since he left the firm last year. Orcel planned to join Santander as CEO after gardening leave only to have the offer pulled over reported disagreements concerning reimbursing deferred compensation. Among several highlights from the sit-down include Orcel reveling in the “overdue” time he now has to spend with his family over the last six months, including his young daughter. But his comments also highlight the difficult realities at home that can often accompany a high-stress career in banking, particularly for a known workaholic like Orcel.
“The disadvantage of being so driven is that you're making some brutal choices that you're not fully aware of, vis-à-vis your family, your friends and other parts of life that you prioritize out,” he said. “I always thought I was a good father because every Friday I would take her to school, I would go to her plays. But then you realize that, yes, you're there, but your brain is going 1,000 miles an hour on what you're going to do next. And children can feel that.”
Billionaire investor Warren Buffett stepped up his consistent criticism of buy-side fees, this time taking aim at the private equity industry. “We have seen a number of proposals from private equity funds where the returns are really not calculated in a manner that I would regard as honest,” he said. (Bloomberg)
Nearly a dozen years following the financial collapse, Lehman Brothers' European presence has nearly been wiped away. The number of administrators overseeing the bank’s final few claims from creditors now stands at 20, down from 750 following the collapse. The job will finally be completed by June 2020. (Bloomberg)
Goldman Sachs CEO David Solomon has preached honesty and transparency since taking the helm last year. It was on full display Thursday at the bank’s investor day when he was asked how Brexit would affect a U.K.-heavy ETF offered by Goldman’s asset-management arm. “Candidly you’re more knowledgeable about that than I am,” he told the investor while promising someone with the firm would get back to her. (WSJ)
Fear over the potential of a Jeremy Corbyn-led government has led Britain’s super-rich to look for ways to retain their wealth, including moving to the island of Guernsey. (The Economist)
Citi has created a new lab where members of its markets and technology teams can use next-gen technologies like machine learning and artificial intelligence to help improve the firm’s trading business. Last summer, the bank made headlines by incorporating computer programming as part of its training sessions for incoming analysts. Citi is all-in on blending technology into as many roles as it can. (Bloomberg)
Hedge fund giant Citadel has hired Glen Popick, the former global head of fixed-income strats at the Morgan Stanley. Popick is reportedly taking the reins as the head of FICC technology at Citadel. (Business Insider)
Proxy adviser Glass Lewis has recommended that Deutsche Bank investors vote against the firm’s management and supervisory board, citing recent investigations that have raised additional questions about the bank’s internal controls. (Bloomberg)
"I'm not known to be a person that lets go, especially when I think that the right thing to do is to not let go. It's not only for me. Just imagine this situation on somebody who is less visible. It's not right." – former UBS investment banking chief Andrea Orcel on his legal fight with Santander (FT)
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