Goldman Sachs assets up 3.8% in quarter, 9.7% for year

Goldman Sachs Group reported $1.66 trillion in assets under supervision for its Goldman Sachs Asset Management and wealth management businesses as of March 31, up 3.8% from three months earlier and up 9.7% from a year earlier, the company's second-quarter earnings report issued Tuesday said.

In its earnings call Tuesday, the firm separately confirmed that it has completed an internal reorganization of several of its alternative investment teams during the quarter.

The growth in assets was attributed to net market appreciation of $32 billion, as well as long-term net inflows of $17 billion, including $13 billion from Goldman's acquisition of Norwalk, Conn.-based Rocaton Investment Advisors, an investment consulting and advisory firm that had more than $600 billion in assets under advisement when Goldman announced the deal in November, the earnings report said.

Goldman's increase in assets under supervision of $61 billion over the quarter was also driven by $12 billion in net inflows into liquidity products, the report said.

In the second quarter, Goldman reported $17 billion in long-term net inflows, compared to long-term net inflows of $20 billion during the previous quarter. In the year-earlier quarter, Goldman saw long-term net inflows of $8 billion.

Separately, liquidity strategies saw net inflows of $12 billion, compared to $22 billion in net outflows during the three months ended March 31, and $10 billion in net inflows during the quarter ended June 30, 2018.

By asset class, Goldman Sachs reported $749 billion in fixed-income assets as of June 30, up 4.5% from three months earlier and up 13% from a year earlier. Equity strategies had $350 billion in assets, up 4.5% over the previous quarter and up 6.4% over June 30, 2018.Across its liquidity products, Goldman had $387 billion in assets, as of June 30, up 3.2% from the three months ended March 31 and up 10.6% year-over-year. Alternative assets reached $174 billion at the end of June and were slightly up for the quarter and year, respectively, by 1.2% and 1.8%.

Net revenues in investment management were $1.59 billion for the second quarter, up 2.4% over the first quarter and down 13.6% over the year.

The decrease in net revenues in investment management compared with 2018's second quarter was primarily due to significantly lower incentive fees. In addition, transaction revenues were lower, the earnings report said.

Investment management and other fees were $1.4 billion for the quarter ended June 30, up 4.7% from the quarter ended March 31 and up 3.7% from the year-earlier quarter.

During the earnings call, Goldman’s CEO David Solomon said that the firm completed an internal reorganization of some of its alternative investment teams.

Last month, Mr. Solomon sent out an internal memo to staff that Goldman’s merchant banking, global special situations group, principal strategic investment group within its securities division, as well as its private real estate teams within Goldman Sachs Asset Management would be combined into “one direct alternative investing” unit housed within its merchant banking division.

Goldman did not provide combined assets for the unit during its earnings call, but Mr. Solomon said the firm would share more information over time.

Goldman’s realty management division, which provides real estate investment and asset management services, partnering with the merchant banking, securities, investment banking and investment management units, was also combined into the unified platform, the June 17 memo obtained by Pensions & Investments said.

Richard Friedman, the former head of merchant banking, now chairs the new unit.

The global division heads will be Julian Salisbury, who leads the global special situations group, and Andrew Wolff and Sumit Rajpal, who now co-head merchant banking.

“Over four decades, we have developed a global, world-class investing franchise that has produced a consistent track record of attractive returns and deep expertise across multiple alternative asset classes and regions,” the memo said.

“These asset classes include private equity, growth capital, infrastructure, credit and real estate. This unified investing platform will enable us to accomplish several strategic objectives over time. These include the raising of additional third-party capital from our institutional and private wealth clients, a more consistent and coordinated marketing approach across strategies and an enhanced ability to attract and retain the most talented investment professionals.”