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Products: The Goldman Sachs Group, Inc. (GS)

Investing and Lending(Investing and Lending)
Equity Underwriting and Debt Origination(Equity Underwriting and Debt Origination)
M and A Advisory(M and A Advisory)
Equity Trading(Equity Trading)
FICC Trading(FICC Trading)
Investment Management(Investment Management)

Investing and Lending

Investing & Lending represents Goldman's investing and relationship-lending activities across asset classes - including debt and equity securities, and real estate.

Goldmans Principal Investments and Other Revenue

This represents revenues from Goldman's investing and relationship-lending activities across asset classes - including debt and equity securities, and real estate.

Goldman's Goldman's Principal Investments & Other Revenue increased from $7 billion in 2005 to $10.5 billion in 2008, but fell to $6.4 billion by 2010 due to the economic downturn. After increasing to $7 billion by 2012, the figure fell steadily to $4.1 billion by 2016.

Chart: Goldmans Principal Investments and Other Revenue

Equity Underwriting and Debt Origination

What is being offered?

Goldman Sachs offers equity & debt underwriting services, which includes public offerings and private placements.

Who are the clients?

Goldman Sachs provides equity & debt underwriting services to:

  1. Large-cap and mid-cap corporations all over the world
  2. Financial institutions
  3. Governments & government agencies

What clients care about?

  1. Expertise in deal making, tailored client solutions & ability to provide insights
  2. Strong execution team
  3. Industry knowledge
  4. Country and regional reach & expertise

Competitors:

  1. Deutsche Bank
  2. Barclays Capital
  3. Morgan Stanley
  4. JPMorgan
  5. Bank of America Merrill Lynch
  6. Citigroup
  7. Credit Suisse
  8. HSBC
  9. Nomura
  10. UBS
  11. Lazard
  12. Rothschild

Global Debt Origination Volume

Global Debt Origination Volume represents the total dollar value of debt issued annually. Such debt includes:

  • Corporate debt - corporations like IBM, Exxon Mobil. Can be investment grade or non-investment grade debt
  • Government agency debt - agencies like Fannie Mae, Sallie Mae, Freddie Mac
  • Sovereign debt - debt issued by countries like Argentina, Mexico, Greece
  • Asset-backed securitization - securitized assets such as credit card loans, auto loans and mortgages

The availability of cheap and easy credit boosted Global Debt Origination Volume by 17% from $6.1 trillion in 2005 to $7.1 trillion in 2006. However, the financial crisis from 2007 to 2009 led to debt origination volume declining sharply from $7.1 trillion in 2006 to a low of $4.3 trillion in 2008. Debt origination remained around $5 trillion in 2010 and 2011 before recovering sharply to reach $5.6 trillion in 2012. The figure increased further to $5.7 trillion by 2014, before falling to $5.3 trillion in 2015 due to weak global economic conditions. Upbeat debt market conditions in 2016 boosted the figure to almost $7 trillion.

Chart: Global Debt Origination Volume

Goldmans Share of Global Debt Origination

Goldman assists corporate, government-agency and sovereign clients in raising debt capital such as bonds and term loans. Goldman's Share of Global Debt Origination represents the firm's total debt origination volume for a particular year as a percentage of global debt origination volume (in dollar terms) for that year.

Goldman's Share of Global Debt Origination averaged around 4.5% between 2005 and 2012, before increasing to roughly 5% over 2013-15 as a result of the bank's increased focus in the debt origination industry. As growth in 2016 was largely seen in developing countries, where Goldman has a small presence, the figure fell to 4%.

Chart: Goldmans Share of Global Debt Origination

M and A Advisory

What is being offered?

Goldman Sachs offers advisory services in Mergers & Acquisitions (M&A) and financial restructuring.across sectors such as energy and power, industrials, healthcare, materials, technology, real-estate, consumer, telecommunications, media and entertainment, retail and government agencies among others.

Who are the clients?

Goldman Sachs provides advisory services to:

  1. Large-cap and mid-cap corporations all over the world
  2. Financial institutions
  3. Governments & government agencies
  4. Hedge funds
  5. Financial Sponsors

What clients care about?

  1. Expertise in deal making, tailored client solutions & ability to provide insights
  2. Strong execution team
  3. Industry knowledge
  4. Country and regional reach & expertise

Competition

  1. Deutsche Bank
  2. Barclays Capital
  3. Morgan Stanley
  4. JPMorgan
  5. Bank of America Merrill Lynch
  6. Citigroup
  7. Credit Suisse
  8. HSBC
  9. Nomura
  10. UBS
  11. Lazard
  12. Rothschild

Global Mergers and Acquisitions Deal Volume

Global Mergers & Acquisitions Deal Volume represents the total dollar value of mergers, acquisitions, spin offs and debt restructuring deals conducted globally.

Global M&A Deal Volume grew from $2.3 trillion in 2005 to $3.8 trillion in 2007 at an average rate of 29%. Consolidation in the financial service & natural resource sectors coupled with private-equity deals led to a flurry of activity. However, Global M&A Deal Volume declined 25% in 2008 and 41% in 2009 as a result of the financial crisis and the recession, ending up below $1.7 trillion in 2009. Economic recovery helped this cross $3.2 trillion by 2016.

Chart: Global Mergers and Acquisitions Deal Volume

Goldmans Share of Global M and A Volume

Goldman provides corporate clients with advisory services related to mergers, acquisitions, spin-offs and debt restructuring. Goldman's Share of Global M&A Volume represents the firm's market share of global merger, acquisition, debt restructuring and other similar advisory transactions based on the dollar volume of the transactions.

Goldman's Share of Global M&A Volume has historically been quite volatile as it is primarily a factor of deals won - something that varies considerably from year to year. The figure has averaged 30% over 2005-16, with a peak level of 36% reported in 2016.

Chart: Goldmans Share of Global M and A Volume

Equity Trading

What is being offered?

Goldman Sachs, through its equity trading division, makes markets in and trades equities and equity-related products, structures and enters into equity derivative transactions.

Who are the clients?

Goldman Sachs develops innovative solutions to meet the financing, investing and hedging needs of:

  1. World's leading Corporates
  2. Governments
  3. Institutional Investors such as pension funds, mutual funds and hedge funds

Competitors:

Goldman Sachs' competitors include,

  1. Deutsche Bank
  2. Barclays Capital
  3. Morgan Stanley
  4. JPMorgan
  5. Bank of America Merrill Lynch
  6. Citigroup
  7. Credit Suisse
  8. HSBC
  9. Nomura
  10. UBS

What clients care about?

  1. Innovative and tailored client solutions
  2. Quick real-time services

Goldmans Yield on Equity Trading Securities

Goldman's Yield on Equity Trading Securities refers to the equity trading income generated as a percentage of the dollar value of the equity trading securities held by the bank.

The yield is attributable to two main factors:

  1. The volume of trading transactions handled by the bank and the profit per transaction
  2. Net gains or losses associated with changes in the fair value (market value) of trading assets held by the bank

Goldman's Yield on Equity Trading Securities was largely around 10% over the 2005-11, with Goldman reporting strong equity trading revenues during and immediately after the economic downturn even as many of its peers booked significant losses over the period. Stricter regulatory norms brought the figure down to around 6% for 2013-14. A notable improvement in equity trading activity over the first half of 2015, coupled with a reduction in valuation of equity securities over the second half of 2015 resulted in the figure increasing to 6.5% for 2015. The figure returned to 6% in 2016.

Chart: Goldmans Yield on Equity Trading Securities

Goldmans Equity Trading Portfolio

Goldman's Equity Trading Portfolio represents the total fair value (market value) of equity trading assets held by the bank at the end of a period.

Banks hold trading assets primarily to facilitate transactions between other buyers and sellers (banks, investment funds, general public) at a profit and to realize gains associated with increases in the value of their trading assets.

Goldman Sachs' Goldman's Equity Trading Portfolio increased from $72 billion in 2005 to $160 billion in 2007, but then fell to $84 billion by 2011, due to the economic downturn. An improvement in global market conditions helped this figure remain around $120 billion over 2012-16.

Chart: Goldmans Equity Trading Portfolio

FICC Trading

What is being offered?

Goldman Sachs, through its Fixed Income, Currency and Commodities (FICC) trading division, makes markets in and trades interest rate and credit products, mortgage-related securities and loan products and other asset-backed instruments, currencies and commodities. FICC has five principal businesses: commodities; credit products; currencies; interest rate products; and mortgage-related securities, loan products and other asset-backed instruments.

Who are the clients?

Goldman Sachs develops innovative solutions to meet the financing, investing and hedging needs of:

  1. World's leading Corporates
  2. Governments
  3. Institutional Investors such as pension funds, mutual funds and hedge funds

Competitors:

Goldman Sachs' competitors include,

  1. Deutsche Bank
  2. Barclays Capital
  3. Morgan Stanley
  4. JPMorgan
  5. Bank of America Merrill Lynch
  6. Citigroup
  7. Credit Suisse
  8. HSBC
  9. Nomura
  10. UBS

What clients care about?

  1. Innovation and tailored client solutions
  2. Quick real-time services

Goldmans Yield on FICC Trading Securities

Goldman's Yield on FICC Trading Securities refers to the FICC trading income earned as a percentage of the dollar value of the FICC trading securities held by the bank. This income includes revenues derived from trading fixed-income assets (bonds), currencies and commodities (precious metals, oil, etc.)

The yield is attributable to two main factors:

  1. The volume of trading transactions handled by the bank and the profit per transaction
  2. Net gains or losses associated with changes in the fair value (market value) of FICC trading assets held by the bank

Goldman's Yield on FICC Trading Securities, which was 4.4% in 2005, increased to above 5.5% by 2007 before falling to under 4% in 2008 due to the economic downturn. Marked improvements in the bond market in 2009 helped this figure scale 8.7% in 2009, before declining to 3.2% in 2011 due to the deteriorating European debt situation. As the global economic improved, yields improved to above 4% for 2014-16.

Chart: Goldmans Yield on FICC Trading Securities

Goldmans FICC Trading Portfolio

Goldman's FICC Trading Portfolio represents the total fair value (market value) of fixed-income, currencies and commodities (FICC) trading assets held by the bank at the end of a period. FICC trading assets consist of:

  • Government securities (bonds, sovereign debt, agency debt)
  • Corporate debt
  • Currencies
  • Commodities (gold, silver, copper, oil, etc.)
  • Derivatives (options to buy or sell other securities)
  • Securitized assets such as mortgage-backed securities

Banks hold trading assets primarily to facilitate transactions between other buyers and sellers (banks, investment funds, general public) at a profit and to realize gains associated with increases in the value of their trading assets.

Goldman's FICC Trading Portfolio increased from $205 billion in 2005 to $293 billion in 2007, but then fell to $246 billion in 2008, due to the economic downturn. With the economic recovery in swing, it increased to $290 billion by 2012. But stricter regulatory requirements resulted in the figure falling to $202 billion by 2014. A sharp reduction in value of debt securities over the second half of 2015 dragged the figure lower to $174 billion, before a industry-wide recovery helped it reach $180 billion in 2016.

Chart: Goldmans FICC Trading Portfolio

Investment Management

What is being offered?

This represents Goldman's asset management arm, which provide private individuals with a full range of mutual fund and alternative investment products, and institutional clients with a fully integrated asset management offering.

Overall, the business division had assets under management (AUM) of $1.38 trillion at the end of fiscal 2016.

Who are the clients?

  1. High Net worth individuals and wealthy families
  2. Institutional investors
  3. Private investors

Competitors:

  1. Deutsche Bank
  2. Morgan Stanley
  3. JPMorgan
  4. Bank of America Merrill Lynch
  5. Citigroup
  6. Credit Suisse

What clients care about?

  1. Investment returns
  2. Safe custody
  3. Track record and brand

Goldmans Fees as % of AUM

Goldman assists institutions and individuals by managing the growth of their money through investments in stocks, bonds, commodities, real estate and other investment asset classes. In return of managing its client's money, the bank charges a fee based on the amount of money (assets) under management. 

Goldman's Fees as % of AUM represents Goldman's annual asset management fee income as a percentage of assets managed.

Goldman's Goldman's Fees as % of AUM remained between 0.5% and 0.6% from 2005 to 2015, with the exception of 2008 when strong demand resulted in higher fees of 0.72%. Overall, the figure has seen a steady decline over 2011-15. But increased competition in the industry coupled with an industry-wide shift towards cheaper fund options lowered this figure to 0.42% in 2016.

Chart: Goldmans Fees as % of AUM

Goldmans Assets Under Management

Assets Under Management represents the amount of money (assets) for investment that Goldman manages on behalf of institutions and individuals - including mutual funds, alternative investments, institutional asset management and assets managed for insurance companies. The bank manages this money through investments in stocks, bonds, commodities, real estate and other investment asset classes. 

Changes in Assets Under Management are primarily attributable to two factors:

  1. Inflows and outflows of client money to be managed
  2. Gains or losses associated with the fair value (market value) of investments made by Goldman on behalf of its clients

Goldman's Assets Under Management has largely increased over the years - growing from $530 billion in 2005 to $1.38 trillion by 2016. Going forward, we expect the figure to grow by 4-5% annually over the Trefis forecast period.

Chart: Goldmans Assets Under Management