Regulatory Impact on Goldman Sachs Funds

The Dodd-Frank Act’s coming effect on Goldman Sachs hedge funds can’t be large because those assets have already shrunk.

In a report Goldman says that the limit set by new regulation on banks’ sponsorship of and investment in hedge and private equity funds is expected to have an impact on its business. But the full implication of the Dodd-Frank Act depends on specific rules developed by various regulatory agencies, a process that is still going on.

An estimate of Goldman’s investments in hedge funds it has sponsored and co-invests with other parties puts the fair value at $3.3 billion, a small AUM in comparison to large hedge fund firms.  Moreover, unlike the hedge fund industry as a whole, the Goldman funds have apparently not received a significant net inflow of capital in the past quarter.

Goldman’s private equity assets are much larger and in general can’t be redeemed. The underlying investments in companies are expected to be liquidated over ten years. Dodd-Frank may have a more substantial effect in that segment.

Separately, the bank has alternative investments in debt, real estate and commodities.

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