Goldman Sachs 2013 Annual Report Download - page 36

Management’s Discussion and Analysis
The decrease in Equities compared with 2012 was due to
the sale of our Americas reinsurance business 1in 2013 and
the sale of our hedge fund administration business in 2012.
Net revenues in equities client execution (excluding net
revenues from our Americas reinsurance business) were
higher compared with 2012, including significantly higher
net revenues in cash products, partially offset by
significantly lower net revenues in derivatives.
Commissions and fees were slightly higher compared with
2012. Securities services net revenues were significantly
lower compared with 2012, primarily due to the sale of our
hedge fund administration business in 2012 (2012 included
a gain on sale of $494 million). During 2013, Equities
operated in an environment characterized by a significant
increase in global equity prices, particularly in Japan and
the U.S., and generally lower volatility levels.
The net loss attributable to the impact of changes in our
own credit spreads on borrowings for which the fair value
option was elected was $296 million ($220 million and
$76 million related to Fixed Income, Currency and
Commodities Client Execution and equities client
execution, respectively) for 2013, compared with a net loss
of $714 million ($433 million and $281 million related to
Fixed Income, Currency and Commodities Client
Execution and equities client execution, respectively)
for 2012.
Investing & Lending
Net revenues in Investing & Lending increased compared
with 2012, reflecting a significant increase in net gains from
investments in equity securities, driven by company-specific
events and stronger corporate performance, as well as
significantly higher global equity prices. In addition, net
gains and net interest income from debt securities and loans
were slightly higher, while other net revenues, related to our
consolidated investments, were lower compared with 2012.
Investment Management
Net revenues in Investment Management increased
compared with 2012, reflecting higher management and
other fees, primarily due to higher average assets under
supervision. During the year, total assets under supervision
increased $77 billion to $1.04 trillion. Long-term assets
under supervision increased $81 billion, including net
inflows of $41 billion 2, reflecting inflows in fixed income
and equity assets, partially offset by outflows in alternative
investment assets. Net market appreciation of $40 billion
during the year was primarily in equity assets. Liquidity
products decreased $4 billion.
Our businesses, by their nature, do not produce predictable
earnings. Our results in any given period can be materially
affected by conditions in global financial markets,
economic conditions generally and other factors. For a
further discussion of the factors that may affect our future
operating results, see “Certain Risk Factors That
May Affect Our Businesses” below, as well as “Risk
Factors” in Part I, Item 1A of the 2013 Form 10-K.
1. In April 2013, we completed the sale of a majority stake in our Americas reinsurance business and no longer consolidate this business. Net revenues related to the
Americas reinsurance business were $317 million for 2013 and $1.08 billion for 2012. See Note 12 to the consolidated financial statements for further information
about this sale.
2. Fixed income flows for 2013 include $10 billion in assets managed by the firm related to our Americas reinsurance business, in which a majority stake was sold in
April 2013, that were previously excluded from assets under supervision as they were assets of a consolidated subsidiary.
34 Goldman Sachs 2013 Annual Report