Goldman Sachs 2015 Annual Report Download - page 77

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Investment Management
Investment Management provides investment management
services and offers investment products (primarily through
separately managed accounts and commingled vehicles,
such as mutual funds and private investment funds) across
all major asset classes to a diverse set of institutional and
individual clients. Investment Management also offers
wealth advisory services, including portfolio management
and financial counseling, and brokerage and other
transaction services to high-net-worth individuals and
families.
Assets under supervision include assets under management
and other client assets. Assets under management include
client assets where we earn a fee for managing assets on a
discretionary basis. This includes net assets in our mutual
funds, hedge funds, credit funds and private equity funds
(including real estate funds), and separately managed
accounts for institutional and individual investors. Other
client assets include client assets invested with third-party
managers, bank deposits and advisory relationships where
we earn a fee for advisory and other services, but do not
have investment discretion. Assets under supervision do not
include the self-directed brokerage assets of our clients.
Long-term assets under supervision represent assets under
supervision excluding liquidity products. Liquidity
products represent money market and bank deposit assets.
Assets under supervision typically generate fees as a
percentage of net asset value, which vary by asset class and
are affected by investment performance as well as asset
inflows and redemptions. Asset classes such as alternative
investment and equity assets typically generate higher fees
relative to fixed income and liquidity product assets. The
average effective management fee (which excludes non-
asset-based fees) we earned on our assets under supervision
was 39 basis points for 2015 and 40 basis points for both
2014 and 2013.
In certain circumstances, we are also entitled to receive
incentive fees based on a percentage of a fund’s or a
separately managed account’s return, or when the return
exceeds a specified benchmark or other performance target.
Incentive fees are recognized only when all material
contingencies are resolved.
The table below presents the operating results of our
Investment Management segment.
Year Ended December
$ in millions 2015 2014 2013
Management and other fees $4,887 $4,800 $4,386
Incentive fees 780 776 662
Transaction revenues 539 466 415
Total net revenues 6,206 6,042 5,463
Operating expenses 4,841 4,647 4,357
Pre-tax earnings $1,365 $1,395 $1,106
The tables below present our period-end assets under
supervision (AUS) by asset class and by distribution
channel.
As of December
$ in billions 2015 2014 2013
Assets under management $1,078 $1,027 $ 919
Other client assets 174 151 123
Total AUS $1,252 $1,178 $1,042
Asset Class
Alternative investments 1$ 148 $ 143 $ 142
Equity 252 236 208
Fixed income 546 516 446
Long-term AUS 946 895 796
Liquidity products 306 283 246
Total AUS $1,252 $1,178 $1,042
Distribution Channel
Institutional $ 471 $ 412 $ 363
High-net-worth individuals 369 363 330
Third-party distributed 412 403 349
Total AUS $1,252 $1,178 $1,042
1. Primarily includes hedge funds, credit funds, private equity, real estate,
currencies, commodities and asset allocation strategies.
The table below presents our average monthly assets under
supervision by asset class.
Average for the
Year Ended December
$ in billions 2015 2014 2013
Alternative investments $ 145 $ 145 $ 145
Equity 247 225 180
Fixed income 530 499 425
Long-term AUS 922 869 750
Liquidity products 272 248 235
Total AUS $1,194 $1,117 $ 985
Goldman Sachs 2015 Form 10-K 65