Goldman Sachs 2009 Annual Report Download - page 59

$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.
Net revenues in Equities of $9.21billion for 2008 decreased
19% compared with a particularly strong 2007, re ecting
losses in principal strategies, partially offset by higher net
revenues in the 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.
Principal Investments recorded a net loss of $3.86billion for
2008. These results included 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
related to our investment in the ordinary shares of ICBC.
Operating expenses of $11.81billion for 2008 decreased 34%
compared with 2007, due to decreased compensation and
bene ts expenses, resulting from lower levels of discretionary
compensation. This decrease was partially offset by increased
depreciation and amortization expenses, primarily re ecting
the impact of real estate impairment charges related to
consolidated entities held for investment purposes during
2008, and higher brokerage, clearing, exchange and
distribution fees, primarily re ecting increased activity levels
in Equities and FICC. Pre-tax loss was $2.75billion in 2008
compared with pre-tax earnings of $13.23billion in 2007.
One Month Ended December 2008. Trading and Principal
Investments recorded negative net revenues of $507million
for the month of December 2008.
FICC recorded negative net revenues of $320million for the
month of December 2008. Results in credit products included
a loss of approximately $1billion (net of hedges) related to
non-investment-grade credit origination activities, primarily
re ecting a writedown of approximately $850million related to
the bridge and bank loan facilities held in LyondellBasell Finance
Company. In addition, results in mortgages included a loss of
approximately $625million (excluding hedges) on commercial
mortgage loans and securities. Interest rate products, currencies
and commodities each produced strong results for the month
of December 2008. During the month of December, although
market opportunities were favorable for certain businesses,
FICC operated in an environment generally characterized by
continued weakness in the broader credit markets.
Net revenues in Equities were $614million for the month of
December 2008. These results re ected lower commission
volumes and lower net revenues from derivatives compared
with average monthly levels in 2008, as well as weak results
in principal strategies. During the month of December,
Equities operated in an environment characterized by
continued weakness in global equity markets and continued
high levels of volatility.
Principal Investments recorded a net loss of $801million for
the month of December 2008. These results included net losses
of $529million from real estate principal investments and
$501million from corporate principal investments, partially
offset by a gain of $228million related to our investment in
the ordinary shares of ICBC.
Operating expenses were $875million for the month of
December 2008. Pre-tax loss was $1.38billion for the month
of December 2008.
ASSET MANAGEMENT AND SECURITIES SERVICES
Our Asset Management and Securities Services segment is
divided into two components:
▪
Asset Management. Asset Management provides investment
and wealth advisory 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
group of institutions and individuals worldwide and
primarily generates revenues in the form of management
and incentive fees.
▪
Securities Services. Securities Services provides prime
brokerage services,  nancing services and securities lending
services to institutional clients, including hedge funds,
mutual funds, pension funds and foundations, and to high-
net-worth individuals worldwide, and generates revenues
primarily in the form of interest rate spreads or fees.
Goldman Sachs 2009 Annual Report
57
Management’s Discussion and Analysis