Goldman Sachs 2007 Annual Report Download - page 7

the liquidity of an exchange with the flexibility
of a private placement. We are proud that
GSTrUE will be integrated into The PORTAL
Alliance
— an industry-wide platform for the
trading of unregistered securities.
Investment Banking remains the front end of our
growing franchise. This is particularly true within
the context of our principal investing activity. The
majority of our principal investing opportunities are
sourced through our client franchise as clients seek
us out as a co-investor and other principals seek us
out as partners. And while retaining our leadership
position in global M&A, we also launched merchant
banking funds with aggregate commitments of
$50 billion during the year.
In our Securities businesses, we are, first and foremost,
a market maker. We price assets, manage risk and
execute transactions on behalf of our clients. This
was particularly visible during the many tumultuous
trading days during the summer. On some occasions,
our U.S. shares trading platforms processed over two
billion shares a day, more than double our average
volume. We also experienced record customer activity
in our credit, rates and currency businesses, not
only during the summer, but for much of the year.
In our Asset Management business, we manage
$868 billion in total assets under management.
In the last year alone, we attracted inflows of
$161 billion. Our ability to offer clients access
to a broad range of investment strategies, from
active equity to private equity fund of funds, to
plain vanilla fixed income and money market
products has been a key differentiating factor.
There are, however, important areas for us to continue
to address. Like many others in the quantitative
fund space, we have had issues with the performance
of certain of our quantitative funds. We know that
we disappointed our clients in those funds, and, we
are focused on learning from this past year’s events.
In addition, direct quantitative hedge funds represent
only five percent of our assets under management,
and we realize the importance of expanding our
product portfolio in actively managed strategies.
Our Stake in the Global Economy
Each of our businesses benefits from a number of
different factors or trends
— from the development
of products and instruments to specific market
dynamics. All of our businesses, however, will
continue to be positively driven by the global
integration of economies and markets.
In 2007, our pre-tax earnings outside the U.S.
exceeded 50 percent for the first time.
In a seminal research piece that coined the term
“BRICs,” we identified early on the breakout potential
of the high-growth countries of Brazil, Russia, India
and China. Historically, however, we have not built
much physical infrastructure in the emerging markets.
That changed in the last two years as we opened
offices in Mumbai, Moscow, São Paulo, Dubai, Doha
and Tel Aviv.
We are also making strategic investments in these
markets. We are currently negotiating a strategic alliance
in Saudi Arabia with NCB Capital, the securities
arm of National Commercial Bank, the largest bank
in the Middle East. We have invested over $1 billion
in India and plan to invest more. And we have
recently acquired an asset management platform
in South Korea with $7 billion in assets under
management to further develop our distribution
capabilities in the region.
The next step for us is to build out our securities
capabilities in these growth markets. In Brazil,
we are now licensed to do onshore fixed income
activities. In Russia, we have built a platform to
trade both cash equity and fixed income products
and select over-the-counter derivative products.
In India, we have cash, futures and options capabilities.
In China, we can trade cash products through
Gao Hua Securities Company Limited, our joint
venture partner. And in South Korea, we received
our banking license, which allows us to offer a
broader range of products to our clients. We continue
to see more opportunities in these and other
developing markets.
Globally, Private Wealth Management (PWM)
also represents a significant opportunity for the firm,
and we are determined to grow our footprint.
5Goldman Sachs 2007 Annual Report