Goldman Sachs 2015 Annual Report Download - page 6

4 Goldman Sachs 2015 Annual Report
Letter to Shareholders
Institutional Client Services
In the wake of balance sheet restructurings in the
U.S. and elsewhere, we remain one of the few financial
institutions with leading global franchises in both FICC
and Equities. We view this as critical to the long-term
success of our Institutional Client Services business.
We expect our ability to offer our clients a broad suite
of services to be a key competitive advantage in the
years ahead.
Over the course of 2015, within FICC, lower levels
of client activity in credit and mortgage products were
partly offset by stronger client activity and a more
favorable backdrop for macro products, particularly
in interest rates and currencies.
Equities benefitted from a better market environment,
posting solid results for the year. Clients continued to
place significant value on the integration of our various
services across Equities — electronic, cash, derivatives
and prime brokerage — as well as our global footprint,
all of which was reflected in our performance in
these areas.
Moving forward, addressing structural changes in our
Institutional Client Services businesses, such as risk-
based capital rules, will remain a central focus for our
management team. At the same time, we will look for
ways to advance our franchise in the evolving landscape.
Competitor retrenchments in the wake of structural
developments should provide an opportunity for us to
capture market share over the longer term.
As it pertains to cyclical trends in Institutional Client
Services, we continue to carefully scale our business
relative to the environment, but have also chosen to
remain targeted in our efforts. Our business is highly
correlated to economic growth, and when a better
opportunity set eventually presents itself — and it
will — our strong, deep and broad client franchise
should position us well to respond.
Investing & Lending
Our Investing & Lending business enhances and expands
our client relationships. It creates synergies for our
broader client franchise because it enables us to extend
credit or to invest alongside our clients. From a broader
perspective, by participating in Investing & Lending in
a disciplined manner, we engage in the capital allocation
process, which allows corporates and individuals to put
capital to work to generate broader economic growth.
Over the past several years, the composition of Investing
& Lending has changed significantly. Since the beginning
of 2012, we have seen lending increase threefold,
primarily to private wealth management and corporate
clients. Our corporate loan portfolio is well diversified,
with no one sector representing more than one-quarter
of the portfolio. Our private equity portfolio similarly
reflects the diversity of our global client franchise,
comprising more than 800 different investments globally
across a broad spectrum of industries. In some cases, we
invest in private companies alongside our clients. In other
cases, we invest in public equity or in real estate, or we
deploy capital to seed new funds.
While the nature of our investing may change over time
due to regulatory changes, and net revenues can fluctuate
from quarter to quarter based on price movements, we
evaluate the performance of our Investing & Lending
portfolio over many years. On that basis, these activities
have been strong contributors to returns over the last
four years.
Investment Management
Our Investment Management business is one of only
a few such franchises globally that can meet the needs
of a broad spectrum of clients across many products and
regions. We serve investors of all types, including retirees
in need of mutual funds, entrepreneurs who have sold
their companies and pension fund managers who need
help with asset allocation. With this in mind, we built