Goldman plans private equity expansion to help offset trading funk

Finance


The new initiative aims to not only profit from investments in the startups, but to make it easier for Goldman to handle public offerings or sales down the line because bankers will already have relationships with management, the people said.

It could be difficult, however, for analysts and investors to track progress.

While the team works within Goldman’s investment bank, any income generated from its equity stakes will flow into Investing & Lending, which is not a business but a reporting category that shows the results of Goldman Sachs employing its own capital.

Since the bank began reporting earnings that way, annual revenue from Investing & Lending has varied widely, from $2.1 billion to $7.5 billion. (Graphic: http://tmsnrt.rs/2y0VHOK)

Through the first nine months of this year, Goldman’s Investing & Lending revenue has soared 90 percent. Private-equity gains helped the bank beat Wall Street third-quarter estimates even as trading revenue slumped.

Some analysts are more optimistic about Goldman’s private-equity push than other initiatives, such as consumer lending or corporate hedging, where it has little to no experience.

“Part of Goldman’s core business is its ability to take equity stakes in companies they’re working with,” said Marty Mosby, an analyst with Vining Sparks. “It may create more volatile outcomes, but ultimately it’s more within their competency than other businesses they’re trying to get into.”



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