Goldman Sachs 2012 Annual Report Download - page 59

Management’s Discussion and Analysis
The tables below present our assets under supervision,
including assets under management by asset class and other
client assets, as well as a summary of the changes in our
assets under supervision.
As of December 31,
in billions 2012 2011 2010
Alternative investments 1$133 $142 $148
Equity 133 126 144
Fixed income 370 340 340
Total non-money market assets 636 608 632
Money markets 218 220 208
Total assets under management (AUM) 854 828 840
Other client assets 111 67 77
Total assets under supervision (AUS) $965 $895 $917
1. Primarily includes hedge funds, credit funds, private equity, real estate,
currencies, commodities and asset allocation strategies.
Year Ended December 31,
in billions 2012 2011 2010
Balance, beginning of year $895 $917 $955
Net inflows/(outflows)
Alternative investments (11) (5) (1)
Equity (13) (9) (21)
Fixed income 8(15) 7
Total non-money market net
inflows/(outflows) (16) (29) (15)
Money markets (2) 12 (56)
Total AUM net inflows/(outflows) (18) (17) 2(71)
Other client assets net inflows/(outflows) 39 (10) (7)
Total AUS net inflows/(outflows) 21 1(27) (78)
Net market appreciation/(depreciation)
AUM 44 540
Other client assets 5——
Total AUS net market
appreciation/(depreciation) 49 540
Balance, end of year $965 $895 $917
1. Includes $34 billion of fixed income asset inflows in connection with our
acquisition of Dwight Asset Management, including $17 billion in assets
under management and $17 billion in other client assets, and $5 billion of
fixed income and equity asset outflows in connection with our liquidation of
Goldman Sachs Asset Management Korea, all related to assets
under management.
2. Includes $6 billion of asset inflows across all asset classes in connection with
our acquisitions of Goldman Sachs Australia Pty Ltd and Benchmark Asset
Management Company Private Limited.
2012 versus 2011. Net revenues in Investment
Management were $5.22 billion for 2012, 4% higher than
2011, due to significantly higher incentive fees, partially
offset by lower transaction revenues and slightly lower
management and other fees. During the year, assets under
supervision increased $70 billion to $965 billion. Assets
under management increased $26 billion to $854 billion,
reflecting net market appreciation of $44 billion, primarily
in fixed income and equity assets, partially offset by net
outflows of $18 billion. Net outflows in assets under
management included outflows in equity, alternative
investment and money market assets, partially offset by
inflows in fixed income assets. Other client assets increased
$44 billion to $111 billion, primarily due to net inflows,
principally in client assets invested with third-party
managers and assets related to advisory relationships.
During 2012, Investment Management operated in an
environment generally characterized by improved asset
prices, resulting in appreciation in the value of client assets.
However, the mix of assets under supervision has shifted
slightly from asset classes that typically generate higher fees
to asset classes that typically generate lower fees compared
with 2011. In the future, if asset prices were to decline, or
investors continue to favor asset classes that typically
generate lower fees or investors continue to withdraw their
assets, net revenues in Investment Management would
likely be negatively impacted. In addition, continued
concerns about the global economic outlook could result in
downward pressure on assets under supervision.
Operating expenses were $4.29 billion for 2012, 7% higher
than 2011, due to increased compensation and benefits
expenses. Pre-tax earnings were $928 million in 2012, 8%
lower than 2011.
2011 versus 2010. Net revenues in Investment
Management were $5.03 billion for 2011, essentially
unchanged compared with 2010, primarily due to higher
management and other fees, reflecting favorable changes in
the mix of assets under management, offset by lower
incentive fees. During 2011, assets under supervision
decreased $22 billion to $895 billion. Assets under
management decreased $12 billion to $828 billion,
reflecting net outflows of $17 billion, partially offset by net
market appreciation of $5 billion. Net outflows in assets
under management primarily reflected outflows in fixed
income and equity assets, partially offset by inflows in
money market assets. Other client assets decreased
$10 billion to $67 billion, primarily due to net outflows,
principally in client assets invested with third-party
managers in money market funds.
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