Everybody Hates Goldman Sachs (Or Do They?)

Guess who won the coveted Most Fund Outflows In The First Half Of the Calendar Year Award.

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.

Goldman Sachs is the worst-selling fund manager in 2017 [FT]


Goldman Sachs Analysts Now Free To Leave The Nest Whenever Or Stay For The Ultimate Payoff

Back in May, we reported that there was a bit of tension between some growing first year analysts and higher-ups at Goldman Sachs. The issue was that the li'l fellas, antsy to leave the nest, were making arrangements with private equity firms and hedge funds for the following year, when they still had a little more than twelve months left until their two year commitment to GS was complete. And while Mama Lloyd and Papa Gar want nothing more than to see their babies succeed, they also felt like the kiddos were jumping the gun a little bit (and were in violation of the rule that when you live under their roof, you play by their rules, namely that no analyst shall take part in recruiting until six months from the time they’ve finished the two year program). To set an example, a bunch of particularly bad analysts were kicked to the curb and while it probably did put the fear of God into the others, who've remained on the straight and narrow ever since, it didn't make anyone very happy. So now this is happening: Goldman Sachs is doing away with two-year contracts for most analysts hired out of college, according to communications reviewed by The Wall Street Journal and confirmed by a Goldman spokesman. Analysts also won't get bonuses for completing the program, which has been around for a quarter of a century and has been viewed as a meal ticket to a lucrative Wall Street career. [...] The New York company's decision came after executives grew frustrated that many graduates weren't staying with the firm after completing the two years, and after Goldman fired a handful of analysts over the past year for signing on to work at other financial companies in violation of their contracts. Goldman has been reaching out to employees over the past two days to inform them of the changes, which will take effect for analysts who will start in 2013. "We think the historic two-year program is no longer the best approach for hiring and developing the careers of analysts in our banking and investment-management divisions," said the Goldman spokesman. "Making this change allows us to emphasize the longer-term career opportunities available atthe firm." No more fighting, no more sneaking around, no more need for anyone to put their foot down. If you want to leave after a year (or sooner), if you think you're grown up enough to make it out there on your own, by all means, go. That's your call and no one's gonna stop your or beg you to reconsider.* But if you decide you want to stay, be it for two years or twelve or twenty, Gary Cohn's thighs appreciate your commitment to the firm and look forward to working with you one day. Goldman Overhauls 2-Year Entry-Level Analyst Program [WSJ] Earlier: Goldman Sachs Does Not Look Kindly Upon First Year Analyst Who Plan In Advance *It's a mistake, of course, but it's yours to make.