Goldman Sachs Group Inc. has revealed plans to reduce the $59 billion in alternative investments that have impacted earnings. According to the division's chief executive, Mark Salisbury, "I would expect to see a meaningful decline from the current levels." He went on to clarify that this decline would not result in the complete elimination of alternative assets, but rather a shift towards investing in and alongside funds, as opposed to individual deals on the balance sheet.
Alternative assets, which include private equity and real estate in addition to traditional investments such as stocks and bonds, had dipped from the prior year's $68 billion, according to the results. The positions included $15 billion in equity investments, $19 billion in loans, and $12 billion in debt securities, as well as other investments.
Slow Market for Asset Sales
According to Salisbury, "the environment for exiting assets was much slower in the back half of the year, which meant we were able to realize less gains on the portfolio compared to 2021." He expects to see "a faster decline in the legacy balance sheet investments" if the environment for asset sales improves.
He stated that "if we would have a couple of normalized years, you'd see the reduction happening" during that period.
Increased Interest in Private Credit
Despite the downturn in alternative investments, Salisbury notes that clients are showing increased interest in private credit due to poor capital markets. "Private credit is interesting to people because the returns available are attractive," Salisbury said.
"Investors like the idea of owning something a little more defensive but high yielding in the current economic environment." In order to increase its revenues, Goldman Sachs' asset management division is planning to significantly reduce its $59 billion in alternative investments.
Mark Salisbury, the division's CEO, is upbeat about the future despite this, saying that if the climate for asset sales improves, we may anticipate a quicker drop in the legacy balance sheet investments. Salisbury further points out that due to the competitive returns offered in the current economic climate, clients are becoming more interested in private credit as a substitute for conventional investments.