Chillin' out till it needs to be funded
Lloyd Blankfein may well continue as President of Goldman Sachs 2nd ed.. The company’s Operating model is in the process of going through a change at the top. The bank is now liable to get into more client facing business as the traction in Fee Advisory income with $73 bln in fees shared in 2011 alone and a low yielding but growing Advisory business in Asia becomes the norm for “Wall Street” investment banks.
Unfortunately for Goldman Sachs, it may be limited in such attractive businesses as Private Equity and Hedge funds if it keeps its new Fed Banking license. While Sales and trading activity have already atrophied and are likely on their way down even further, the bank will focus on developing a Wealth management business through Funds management (asset management biz) developing its buy side skills for its clients while keeping its execution capabilities strengths of a leaner Research and Trading force as it had appeared first on the scene just two decades ago.
Goldman Sachs might miss its Investment Bankers like Milton Berlinski who retired last week after having last headed the firm’s relationships with key private equity and hedge fund businesses as Lloyd Blankfein gets ready for a second innings.
Goldman Sachs is thus said to be mulling options to geta asset management business worth the effort even as European and Asian plays in the insustrya re on the chopping block including a key DWS portfolio of the Deutsche Bank which includes its US retail and institutional business with $540 bln in funds under management on sale ( in 3-4 pieces) If the Goldman Sachs interest is in acquiring a new brand fromt he funds management market, it should invest in retail and not just size of portfolio from insurance and / or institutional assets.
Of course buying the DWS Institutional Holdings with $162 bln may still yield some relationships for GS but likely it wil benefit more from the $56 bln Scudder funds. And while plans grow on people, it is unlikely that Goldman Sachs will later go for Capital One/ Orange deposits or another retail assets & liabilities franchise in its bid to be a new era bank in line with its mandate, leaving it with a new requirement for recruitments and organisation even as Blankfein’s promoting of Sales and Trading personnel to key positions is no longer a preferred strategy for the bank. The firm has also agreed to not agree with BRICS according to its Asset management Leader Jim O Neill’s pronouncements for 2012.
The US is indeed a tempting and yet available market for a good banking and investment franchise.