Goldman Sachs had $5.4 billion in private equity fund interests on its balance sheet on 31 December, up 2 percent from $5.3 billion in the third quarter, according to its annual regulatory filing with the US Securities and Exchange Commission.
Despite the slight increase in the fourth quarter, the fair value of Goldman Sachs’s investments in private equity was down 14 percent from $6.3 billion at the end of 2014.
The Volcker Rule, which came into effect in July 2015, limits how much banks can sponsor and invest in funds such as private equity, credit, hedge funds and real estate to 3 percent of the fund’s net asset value (NAV). Banks must comply by July 2017.
As previously reported by Secondaries Investor, Goldman has decided to let the investments run until the end of their lives and may consider the secondaries market only if interests remain by the 2017 deadline. The firm indicated in the filing that it expects to exit most of its interests before July 2017, but it may sell those interests in the event an exit is not possible.
“If that occurs, the firm may receive a value for its interests that is less than the then carrying value as there could be a limited secondary market for these investments and the firm may be unable to sell them in orderly transactions,” it wrote in the filing.
Its interest in real estate funds as of 31 December was $1.2 billion, down 11 percent from $1.3 billion in the third quarter and 18 percent from $1.4 billion as of December 2014.
Including its interest in credit and hedge funds, the total fair value of Goldman’s investments stood at $7.8 billion as of 31 December, down 8 percent from $9.6 billion as of 31 December 2014.