New York-based Goldman Sachs Group has $15.4 billion invested in private equity funds and other alternative investments, according to a recent regulatory filing. The figure is down marginally from the $15.9 billion it reported as of December 2009.
Goldman’s $15.4 billion in alternatives holdings comprise $7.3 billion in private equity funds, $4.18 billion in private-debt funds, $3.02 billion in hedge funds and $910 million in real estate funds.
The bank will liquidate a “substantial” portion of these investments over the following decade, the filing said.
A spokesperson clarified that this was in keeping with normal business practices for bank holding companies that own private equity assets and was not related to the so-called Volcker rule. The rule, part of the recently signed “Dodd-Frank” bill, restricts banks from deploying more than 3 percent of their Tier 1 capital – essentially equity capital and disclosed reserves – in private equity and hedge funds.
With Goldman’s Tier 1 capital at $68.5 billion, the bank would need to reduce its stakes in private equity funds and other alternative investments to roughly $2.1 billion – however it has a great deal of time to do so.
The Volcker rule will take effect anywhere from 15 to 24 months from 21 July 2010, the date the act was signed into law. Depending on the exact nature of future rules expected from federal regulators, banks will then have two further years to comply, with the possibility of three one-year extensions following that. After that time, the Federal Reserve also has the right to give banks operating “illiquid funds” – such as private equity – a further five years to comply with the new regulations, meaning the longest available transition period would be 12 years.
Goldman Sachs Principal Investment Area ranked first in this year's PEI 300, an annual ranking of the largest private equity firms in the world.