This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Goldman Sachs Cutting Private Equity Future in Half

NEW YORK ( TheStreet) -- Goldman Sachs (GS - Get Report) is bracing for a revival in corporate mergers and the underwriting of bonds and stock, but the investment bank has better things to do with its precious capital than maintain its big presence in the private equity industry.

Richard Friedman, the head of Goldman's merchant banking division, said Thursday at the Dow Jones Private Equity Analyst conference that Wall Street titan will cut likely cut the size of its private equity investments by about 50% in coming years.

Prior to the financial crisis, Goldman Sachs raised a $20.7 billion fund, one of the biggest in industry. But Friedman said the fund is fully invested and already returning money to investors. Meanwhile the bank's private equity bets are expected to settle at half of their pre-crisis size.

That's in stark contrast to other private equity shops like Apollo, Blackstone and Carlyle that, while also beginning to return investor money on old funds, are also busy raising for new funds in excess of $10 billion.

Goldman, however, is sitting this round out, with Friedman adding that the bank is simply pitching buyouts to its clients on a "deal by deal basis," such as a recent $1.1 billion buyout of Interline Brands. In past years, Goldman was front and center role in taking a piece of some of the largest pre-bust buyouts like the takeover of Kinder Morgan (KMI), TXU, Nextel and Biomet.

For banks like Goldman, the change of tone is a reflection of a new post-crisis regulatory environment.

In the immediate wake of the crisis, JPMorgan Chase (JPM - Get Report), Goldman Sachs (GS - Get Report), Morgan Stanley (MS - Get Report) and Bank of America (BAC - Get Report) generally grew assets through mergers or took a greater hold over key underwriting, advisory and market making markets as competitors exited.

But hindered by new regulations like the Volcker Rule, which limits proprietary trading and private equity investments to 3% of overall capital and stiffer rules on leverage, Wall Street investment banks are braced to cede the world of buyouts and distressed investments to private equity firms. Meanwhile, banks aren't likely to see a significant revival of buyout financing, cutting at one of the more lucrative underwriting businesses on Wall Street.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BAC $15.81 0.00%
C $52.42 0.00%
GS $189.79 0.00%
JPM $61.28 0.00%
MS $35.79 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs