PE drives Goldman’s equities returns in Q1

The bank's equities portfolio was up 34%, a year after receiving an extension on its Volcker Rule divestment obligations.

Private equity was a strong driver of revenue for Goldman Sachs during the first quarter of 2018.

According to the bank’s quarterly results call on Tuesday, net revenues from equity securities, encompassing public and private equity investments, were 34 percent higher year-on-year at $1.07 billion.

This reflected a “significant increase” in net gains from private equities, which offset lower net gains from the public portfolio, the bank said in an accompanying statement. “Company-specific events and corporate performance” were the main drivers of this success, the statement noted.

“We clearly saw an excellent environment for harvesting and we’ve been actively harvesting to maximise value for investors and to comply with [Volcker Rule] regulations,” chief financial officer R. Martin Chavez said on the call.

He added that the diversification of its private equity portfolio, by geography and sector, helped it generate higher returns than its peers this quarter.

Chavez also acknowledged the growing likelihood that a modified Volcker Rule will be proposed by the Federal Reserve, though he did not comment on the likely character of such a rule.

“Various officials say it’s a rule with a relatively straightforward concept or intent but in its current form, the compliance, the number of data points one has to generate, it’s quite complicated,” he said. “Our thought would be that proposed rule-making [if it happens] is likely to considerably simplify the process of conformance.”

On the bank’s first-quarter 2017 earnings call, Chavez confirmed Goldman Sachs had secured a five-year extension on its Volcker Rule divestment obligations. The investment bank previously had until 21 July last year to offload its private fund stakes.