Goldman Sachs 2009 Annual Report Download - page 6

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Strategic Advice
Our advisory business serves as our primary point of contact
with our clients and is often the genesis for sourcing other
opportunities to serve them. In some instances, business
garnered from our long-standing investment banking relationships
is captured from a  nancial reporting perspective in the revenues
reported within other segments, particularly within our Trading
and Principal Investments segment. For instance, we have been
successfully building our risk management solutions business
within investment banking — encapsulating our strategy
of integrating advice, capital and risk management expertise.
Since 2005, revenues from this business have grown 32percent
compounded annually. This trend is consistent with our business
model and operating philosophy which are predicated on the
 rm functioning as an integrated whole.
While classic advisory revenues in 2009 reached a near
cyclical low, the latter half of the year yielded greater
levels of strategic dialogues, re ecting an improvement in
CEO con dence. Although it is dif cult to predict what
types of transactions or which industries will rebound most
quickly, our broad and deep franchise allows GoldmanSachs
to remain knowledgeable and relevant across multiple
sectors, and poised to serve our clients. Over the past  ve
years, Investment Banking has advised over 1,000 clients
in 67 countries, solidifying our leading market share
position and allowing us to retain industry-leading positions
in cross-border, acquirer, target and strategic defense
advisory league tables.
Financing for Growth
Our investment banking relationships are also the basis
for most of our financing mandates. As a financial
intermediary, GoldmanSachs acts to match the capital
of our investing clients with the needs of our corporate
and government clients, who rely on financing to generate
growth, create jobs and deliver the products and services
that drive economic development. Since the beginning of
2007, we have underwritten over $750billion in corporate
debt and over $450billion in equity and equity-related
products across approximately 1,900 offerings for
800 clients globally.
We have a long history of helping states and municipalities
access the capital markets. Since entering the public  nance
business in 1951, GoldmanSachs has been one of the most
signi cant industry participants and over the past decade
has helped states and municipalities raise over $250billion
in capital. In 2009, we were the number one underwriter
for the Build America Bond program, which allows states and
municipalities to meet their borrowing needs and invest in
infrastructure projects. We also helped  nance over $28billion
for nonpro t institutions including education services, healthcare
and government entities.
Market Intermediary
Through our role as a market maker, we commit and deploy our
capital to ensure that buyers and sellers can complete their
transactions, contributing to the liquidity, ef ciency and stability
of  nancial markets. Throughout the crisis, we made prices
when markets were volatile and illiquid and extended
credit when credit was scarce. Fixed Income, Commodities
and Currencies (FICC) and Equities, our market intermediation
businesses that comprise our Securities Division, were
meaningful drivers of our strong  rmwide performance last year.
By remaining close to our clients, we were able to direct
our human and  nancial capital to those businesses within our
market making franchise that most re ected clients’ interests
and needs. Another important component of growth has been
the dynamic that, as clients grow in size, the scope of the
business that they execute with the  rm also increases.
In 2009, 2,500 of our clients were active across both Equities
and FICC products, which is up 25percent from 2006.
Client-Driven Risk Exposures
Given concern by some over the nature and level of risk that
 nancial institutions undertake, it is important to note that for
GoldmanSachs, the vast majority of the risk we take and the
revenues we generate is derived from trades that advance a
client need or objective.
By way of example, in 2009, an energy consumer asked us
to help protect it against a rise in the cost of fuel, concerned that
an increase would affect its ability to grow. To accomplish this,
GoldmanSachs structured a long-term collateralized hedge
facility. We then entered into hedges to offset the fuel price risk
that we had assumed. As part of our normal accounting and
risk management, we regularly revalue the amount of collateral
necessary to be posted when fuel prices declined during
the life of the transaction. We also routinely hedge our client
counterparty risk in addition to receiving collateral. In the end,
we were able to structure the transaction at a fair price for
our client and generate an attractive risk-adjusted return for the
 rm and our shareholders. This is representative of the risk we
assume and manage daily to allow our clients to focus on their
underlying businesses.
Co-Investing
Co-investing is another way we directly align the  rm’s interests
with those of our clients. Two-thirds of our corporate investing
opportunities are sourced from our investment banking
relationships. In addition, the vast majority of money committed
to our investing funds comes from our clients, who seek
to partner with us. While returns  uctuate based on equity
market performance and other factors, our merchant banking
businesses have provided much needed capital to our
investment banking clients and achieved strong returns for our
investors and shareholders over the long term. This business
Goldman Sachs 2009 Annual Report