Behind Goldman’s Investing, Lending, and Investment Management in 1Q17
Investing and Lending
Goldman Sachs (GS) saw revenues of nearly $1.5 billion in its Investing and Lending division—far higher than in 1Q16 and similar to 4Q16. This YoY (year-over-year) rise was mainly due to a substantial increase in net gains from investments in private and public equities, mainly impacted by corporate performance and an increase in the broad index (SPX-INDEX) (SPY) and global equity prices.
This division also saw higher debt and loan revenues on net gains from investments in debt instruments and higher net interest income.
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Goldman Sachs had total assets under supervision of $1.37 trillion as of March 31, 2017, which reflects a $6-billion decline from 4Q16. The division managed revenues of $1.5 billion—a growth of 12% as compared to 1Q16 and a 7% decline sequentially. The YoY rise was mainly due to higher incentive fees and higher management and other fees.
The division also saw $24 billion in market appreciation, with $5 billion in inflows that were offset by $35 billion outflows from liquidity products. Goldman Sachs competes with asset managers like BlackRock (BLK) and Blackstone (BX) for long-term inflows from retail as well as institutional clients. Notably, the asset management industry is facing headwinds from ETFs and index fund providers at low costs, which has resulted in lower margins and lower asset allocation for active asset management.
In the next part, we’ll analyze Goldman’s valuations after the 1Q17 results.