Goldman Sachs 2013 Annual Report Download - page 7

5Goldman Sachs 2013 Annual Report
As performance has improved, so have asset inflows.
We had net sales in long-term assets under supervision
of $41 billion, the highest since 2007, which were broadly
distributed across our three key client channels: High-net-
worth individuals, Third-party distributed and Institutional.
This focus on performance has been a critical component
in generating our highest net revenues for Investment
Management since 2007.
Investing & Lending
Investing & Lending includes direct investing, our investing
through funds, as well as lending to both corporations and
high-net-worth individuals.
Our investing activity, including co-investing with our clients,
has established itself as an important complement to our
other franchise businesses. We have a history of strong
investment performance over the years, and that reputation,
along with deep client relationships, have allowed us to
invest in opportunities that are not available to others.
Our debt investments are driven by senior loan and mezzanine
investments, and our direct financing and lending businesses.
Our Investing & Lending business includes approximately
$31 billion of direct loans, primarily extended to corporate
clients and high-net-worth individuals. Our equity investments
include private equity funds, direct equity investments and
hedge fund investments. The “Volcker Rule,” which we will
discuss in more detail, limits our ability to invest in hedge
funds and private equity through a fund structure; as such, for
some time now in anticipation, we have been redeeming our
hedge fund investments to be compliant. While we’ve been
actively harvesting our private equity funds, solid asset price
performance has kept balance sheet levels relatively flat.
Our investing and lending activities are synergistic
with our other activities and are valuable to our clients.
We remain committed to these businesses and, now with
greater regulatory clarity, we know that with the necessary
adjustments, we will continue to work with our clients
as an investor.
Regulation
In December, regulators passed the final Volcker Rule,
which restricts banking entities’ proprietary trading activities
and certain interests in, and relationships with, hedge funds
and private equity funds.
For our FICC businesses, providing liquidity to our investing
clients requires us to take risk, and as a consequence, FICC
is the largest consumer of our capital. Our commitment to
these businesses does not mean that we haven’t taken
significant action regarding how we utilize capital. We have
meaningfully reduced risk-weighted assets in FICC and are
very focused on managing it for risk-adjusted returns. Chasing
revenue market share within FICC businesses can lead to
risk management lapses and inferior returns. Focusing on
the right balance between risk, revenue and returns has
been important to building a leading global franchise and
consistently delivering strong returns for our shareholders.
Investment Management
With total assets under supervision surpassing a record
trillion dollars, our Investment Management business is
one of the largest in the world. We have a strong position
across a diverse set of products spanning all major asset
classes and geographies. And, despite the challenging market
environment, we have been able to grow long-term assets
under supervision by 36 percent since the beginning of 2007.
Additionally, we have expanded our defined contribution
franchise, with approximately $50 billion in new assets
from our acquisition of Dwight Asset Management and
our pending acquisition of Deutsche Bank’s stable
value business.
Like our other businesses, success in Investment
Management is a function of performing for our clients.
Our asset-weighted mutual fund performance has been
above the industry average for nine consecutive quarters
through 2013. Two-thirds of our mutual fund assets were
ranked in the top two quartiles by Morningstar across
one, three and five year performance periods.
”The past year
represented one of
our strongest market
share performances
in our advisory
and underwriting
franchises
since 2000.”