Goldman Seen Expanding Asset Management Focus and De-emphasizing Trading

Goldman Sachs CEO Lloyd Blankfein is reportedly mulling some shifts designed to emphasize Goldman Sachs Asset Management, according to Fox News. Trading, however, could be scaled back as part of that process.

Goldman aims to alter a business model that for the past decade produced huge earnings by making massive trading bets in various markets across the globe, said Fox, attributing that statement to people who are in the know about the firm.

What will Goldman’s new business model look like? That’s not altogether clear, but there are a few clues:

- For one thing, the firm has told analysts that it will expand its asset management business—“even possibly buying one,” says Fox.

- Regulators have been on Goldman’s back about its focus on the business of assuming trading risk, although this has been a major driver of company profits. Besides prop trading where it risks its own capital to take market bets, regulators are said to be pressuring Goldman to scale back on other trading activities, including buying and selling securities on behalf of clients.

Asset management offers steadier and more predictable returns than trading, but it’s still a mystery as to how Goldman will go about expanding its focus here, observers note.

“Will it buy another firm? Will it seek a more developed retail presence, in the manner of a Morgan Stanley Smith Barney?” asks one blogger.

“The bank also wants to return to its roots: a classic investment bank, aiming for more classic underwriting mandates and deal advisory work. As Blankfein ponders the future, it will be interesting to see who emerges as the next CEO,” says that report.

Blankfein recently was overheard during a dinner conversation with BlackRock CEO Larry Fink saying, “In the end, Goldman Sachs is still going to be Goldman Sachs.”