Goldman Sachs 2009 Annual Report Download - page 51

primarily re ected the impact of changes in the composition of
assets managed, principally due to equity market depreciation
during the fourth quarter of 2008, as well as lower incentive
fees. During the year ended December31, 2009, assets under
management increased $73billion to $871billion, due to
$76billion of market appreciation, primarily in  xed income
and equity assets, partially offset by $3billion of net out ows.
Out ows in money market assets were offset by in ows in
 xed income assets.
Net revenues in Investment Banking decreased compared
with 2008, re ecting signi cantly lower net revenues in
Financial Advisory, partially offset by higher net revenues
in our Underwriting business. The decrease in Financial
Advisory re ected a decline in industry-wide completed
mergers and acquisitions. The increase in Underwriting
re ected higher net revenues in equity underwriting,
primarily re ecting an increase in industry-wide equity and
equity-related offerings. Net revenues in debt underwriting
were slightly lower than in 2008.
2008 versus 2007. Our net revenues were $22.22billion in
2008, a decrease of 52% compared with 2007, re ecting
a particularly dif cult operating environment, including
signi cant asset price declines, high levels of volatility and
reduced levels of liquidity, particularly in the fourth quarter.
In addition, credit markets experienced signi cant dislocation
between prices for cash instruments and the related derivative
contracts and between credit indices and underlying single
names. Net revenues in Trading and Principal Investments
were signi cantly lower compared with 2007, re ecting
signi cant declines in FICC, Principal Investments and
Equities. The decrease in FICC primarily re ected losses
in credit products, which included a loss of approximately
$3.1billion (net of hedges) related to non-investment-grade
credit origination activities and losses from investments,
including corporate debt and private and public equities.
Results in mortgages included net losses of approximately
$1.7billion on residential mortgage loans and securities and
approximately $1.4billion on commercial mortgage loans and
securities. Interest rate products, currencies and commodities
each produced particularly strong results and net revenues
were higher compared with 2007. During 2008, although
client-driven activity was generally solid, FICC operated in
a challenging environment characterized by broad-based
declines in asset values, wider mortgage and corporate credit
spreads, reduced levels of liquidity and broad-based investor
deleveraging, particularly in the second half of the year. The
decline in Principal Investments primarily re ected net losses
of $2.53billion from corporate principal investments and
$949million from real estate principal investments, as well as
a $446million loss from our investment in the ordinary shares
of ICBC. In Equities, the decrease compared with particularly
strong net revenues in 2007 re ected losses in principal
strategies, partially offset by higher net revenues in our client
franchise businesses. Commissions were particularly strong
and were higher than 2007. During 2008, Equities operated in
an environment characterized by a signi cant decline in global
equity prices, broad-based investor deleveraging and very high
levels of volatility, particularly in the second half of the year.
Net revenues in Investment Banking also declined signi cantly
compared with 2007, re ecting signi cantly lower net revenues
in both Financial Advisory and Underwriting. In Financial
Advisory, the decrease compared with particularly strong net
revenues in 2007 re ected a decline in industry-wide completed
mergers and acquisitions. The decrease in Underwriting
primarily re ected signi cantly lower net revenues in debt
underwriting, primarily due to a decline in leveraged  nance
and mortgage-related activity, re ecting dif cult market
conditions. Net revenues in equity underwriting were slightly
lower compared with 2007, re ecting a decrease in industry-
wide equity and equity-related offerings.
Net revenues in Asset Management and Securities Services
increased compared with 2007. Securities Services net
revenues were higher, re ecting the impact of changes in the
composition of securities lending customer balances, as well
as higher total average customer balances. Asset Management
net revenues increased slightly compared with 2007. During
the year, assets under management decreased $89billion
to $779billion, due to $123billion of market depreciation,
primarily in equity assets, partially offset by $34billion of
netin ows.
One Month Ended December 2008. Our net revenues were
$183million for the month of December 2008. These
results re ected a continuation of the dif cult operating
environment experienced during our  scal fourth quarter of
2008, particularly across global equity and credit markets.
Trading and Principal Investments recorded negative net
revenues of $507million. Results in Principal Investments
re ected net losses of $529million from real estate principal
Goldman Sachs 2009 Annual Report
49
Management’s Discussion and Analysis