Money is moving into hedge funds, but it has certainly not gone to Goldman Sachs. Alternative investments managed by the bank show a net outflow of capital in the third quarter, even as the firm’s asset management arm had an increase in fee revenue thanks to market appreciation in the value of investments.
Goldman’s alternative assets were $148 billion as of Sep 30th, up from $145 billion a year ago, but the increase was due to market recovery. During the second quarter of this year there was a net positive inflow of $1 billion but that reversed in the third quarter with a net outflow by the same amount.
It won’t be a surprise if the Securities and Exchange Commission’s fraud investigation –settled for $550 million by Goldman – scared off clients. And regulatory changes, specifically the Volcker rule in the Dodd-Frank Act, restrict banks’ private equity and hedge fund holdings.
But Goldman lost assets in traditional equities as well as alternatives and its total assets in all classes are down from a year ago, largely because equity and money market funds shrank. In the third quarter fixed income was the only asset class where Goldman had a net positive capital inflow.
Admittedly, quarterly numbers can be subject to seasonal fluctuations, especially in alternatives—-some big investors allocate at certain times of the year and not at other times. But for an asset manager that used to be seen as, well, the gold standard, the past couple of years must have been humbling.
HedgeFundSmarts 