Goldman Sachs 2015 Annual Report Download - page 78

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
The table below presents a summary of the changes in our
assets under supervision.
Year Ended December
$ in billions 2015 2014 2013
Balance, beginning of year $1,178 $1,042 $ 965
Net inflows/(outflows)
Alternative investments 71 (13)
Equity 23 15 13
Fixed income 41 58 41 3
Long-term AUS net inflows/(outflows) 71 174 41
Liquidity products 23 37 (4)
Total AUS net inflows/(outflows) 94 111 237
Net market appreciation/(depreciation) (20) 25 40
Balance, end of year $1,252 $1,178 $1,042
1. Includes $18 billion of fixed income, equity and alternative investments asset
inflows in connection with our acquisition of Pacific Global Advisors’
solutions business.
2. Includes $19 billion of fixed income asset inflows in connection with our
acquisition of Deutsche Asset & Wealth Management’s stable value
business and $6 billion of liquidity products inflows in connection with our
acquisition of RBS Asset Management’s money market funds.
3. Includes $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.
2015 versus 2014. Net revenues in Investment
Management were $6.21 billion for 2015, 3% higher than
2014, due to slightly higher management and other fees,
primarily reflecting higher average assets under supervision,
and higher transaction revenues. During 2015, total assets
under supervision increased $74 billion to $1.25 trillion.
Long-term assets under supervision increased $51 billion,
including net inflows of $71 billion (which includes
$18 billion of asset inflows in connection with our
acquisition of Pacific Global Advisors’ solutions business),
and net market depreciation of $20 billion, both primarily
in fixed income and equity assets. In addition, liquidity
products increased $23 billion.
During 2015, Investment Management operated in an
environment generally characterized by strong client net
inflows, which more than offset the declines in equity and
fixed income asset prices, which resulted in depreciation in
the value of client assets, particularly in the third quarter of
2015. The mix of average assets under supervision shifted
slightly from long-term assets under supervision to liquidity
products compared with 2014. In the future, if asset prices
continue to decline, or investors continue to favor asset
classes that typically generate lower fees or investors
withdraw their assets, net revenues in Investment
Management would likely be negatively impacted.
Operating expenses were $4.84 billion for 2015, 4% higher
than 2014, due to increased compensation and benefits
expenses, reflecting higher net revenues. Pre-tax earnings
were $1.37 billion in 2015, 2% lower than 2014.
2014 versus 2013. Net revenues in Investment
Management were $6.04 billion for 2014, 11% higher than
2013, reflecting higher management and other fees,
primarily due to higher average assets under supervision, as
well as higher incentive fees and transaction revenues.
During 2014, total assets under supervision increased
$136 billion to $1.18 trillion. Long-term assets under
supervision increased $99 billion, including net inflows of
$74 billion (including $19 billion of fixed income asset
inflows in connection with our acquisition of Deutsche
Asset & Wealth Management’s stable value business) and
net market appreciation of $25 billion, both primarily in
fixed income and equity assets. In addition, liquidity
products increased $37 billion (including $6 billion of
inflows in connection with our acquisition of RBS Asset
Management’s money market funds).
During 2014, Investment Management operated in an
environment generally characterized by improved asset
prices, primarily in equity and fixed income assets, resulting
in appreciation in the value of client assets. In addition, the
mix of average assets under supervision shifted slightly
from liquidity products to long-term assets under
supervision, due to growth in fixed income and equity
assets, compared with 2013.
Operating expenses were $4.65 billion for 2014, 7% higher
than 2013, primarily due to increased compensation and
benefits expenses, reflecting higher net revenues, and higher
fund distribution fees. Pre-tax earnings were $1.40 billion
in 2014, 26% higher than 2013.
Geographic Data
See Note 25 to the consolidated financial statements for a
summary of our total net revenues, pre-tax earnings and net
earnings by geographic region.
66 Goldman Sachs 2015 Form 10-K