Oftentimes we tend to discuss Goldman Sachs as if it occupied a plane unto itself, like one of these genetic anomalies who go to Harvard at age 12 and spend their free time teaching themselves molecular bioscience. Direct comparisons just aren't fair to their peers. But as we are occasionally reminded, Goldman suffers the same slings and arrows as any other bank. Here's a particularly stark reminder:
Goldman Sachs Asset Management is the worst-selling fund manager globally this year, intensifying pressure on the investment house that is already grappling with falling revenues and profits. Investors pulled an estimated $26.7bn from GSAM’s mutual funds so far in 2017, with more than half of the asset manager’s strategies globally suffering outflows.
For a $1.3 trillion asset division, these outflows aren't crushing. But neither are they minuscule, particularly in the context of an investor base increasingly allergic to fees and anything even remotely actively managed.
What's particularly notable about these outflows, then, is that GSAM hasn't sat idly by as the asset management zeitgeist drifted into Betaworld. Goldman rolled out its first ETFs – some of which managed to undercut the investment Borg that is Vanguard – in 2015. Bond ETFs followed this year. Yet collectively, GSAM's smart beta offerings hold just $4.4 billion, just a fraction of the cumulative outflows from GSAM this year alone. Needless to say, the investors fleeing Goldman's funds aren't opting for its in-house ETFs.
This being Goldman, however, there's a perfectly sensible (and for GSAM, happily exculpatory) explanation for the poor fund showing in the first half: money market reforms. Last year regulators did what regulators do and industry suffered. As an unnamed Goldman spokes-entity informed the FT, the bank's non-money-market funds have actually seen inflows ($6.5 billion) in 2017. Moreover:
“By their nature, money market fund flows in any short period are a misleading measure of our business or longer term performance for clients,” the spokesman said.
The only crack in this explanation is the fact that Goldman isn't the only fund manager to face money market reforms. So did JPMorgan, for instance, whose main USD fund is more than twice the size of Goldman's. Yet Goldman still beat out JPMorgan for cumulative 2017 fund outflows. If Goldman's withdrawals all stemmed from a broader money market retreat, then either JPM saw even higher mutual fund inflows, or it tried harder to keep its money market assets from jumping ship.
On the latter point, it's certainly possible that GSAM just doesn't see the point of trying anymore and let those investors flock to better and cheaper money market funds. It just seems a little unGoldmanlike.