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Goldman Sachs Seeks Bigger Share of U.S. Retirement Savings
May 18 (Bloomberg) -- Goldman Sachs Group Inc., facing a fraud lawsuit from U.S. regulators who accuse the company of misleading investors, is trying to convince more Americans to trust the firm with their retirement funds.
The New York-based company is promoting alternative asset funds and designing target-date funds that provide guaranteed income to grab a bigger piece of the $2.7 trillion 401(k) market, said Bill McDermott, a managing director at Goldman Sachs Asset Management and head of its defined-contribution business.
“We understand risk and we understand asset allocation,” said McDermott, who joined the firm in February to strengthen its retirement-plan products and marketing. “We’re looking to leverage that for the 401(k) market.”
Goldman’s 401(k) plan assets totaled $17.5 billion as of March 31, according to the company. Fidelity Investments, the largest 401(k) asset manager, had $347.8 billion as of December 31. Assets in 401(k) plans are estimated to increase 41 percent, to $3.8 trillion, by the end of 2014, according to data from Cerulli Associates in Boston.
Goldman and BlackRock Inc., the world’s largest asset manager, don’t administer retirement plans and have been seeking more 401(k) business. The business has been dominated by firms such as Boston-based Fidelity and Vanguard Group, based in Valley Forge, Pennsylvania, which administer plans as well as manage assets.
‘Writing on the Wall’
“A lot of investment-only managers are trying to get in,” said Lori Lucas, defined contribution practice leader at San Francisco-based Callan Associates, an investment consulting firm. “They see the writing on the wall,” as traditional pensions are replaced by 401(k) plans.
Goldman’s move comes after an April 16 lawsuit brought by the U.S. Securities and Exchange Commission that accuses the firm of misleading investors in a mortgage-linked investment. Goldman denies those allegations and said it will fight the charges. A Senate panel grilled executives, including Chief Executive Officer Lloyd Blankfein, on April 27 about the case.
“Having issues certainly isn’t going to help. But all the signs so far are telling us that clients are sitting tight,” said Teresa Epperson, a partner at Mercatus, a Boston-based financial consulting firm. “Goldman’s capabilities are in trading strategies and hedging risks. The extension of those absolute-return strategies could be attractive to plan sponsors.”
Fiduciary Duty
The asset management division that McDermott works in is separate from the mortgage unit that sold the securities at the center of the SEC’s fraud suit against Goldman. A key difference between the two businesses is that the asset management division operates under a fiduciary duty to its clients, whereas the sales and trading division doesn’t.
“When a client gives us their money and their assets to manage, we are 100 percent their fiduciary, we must manage their money in the most prudent fashion possible using our best judgment possible,” Goldman Sachs President Gary Cohn said on May 11 at an investor conference in New York. “The rest of Goldman Sachs is not in the fiduciary business.”
Goldman’s total assets under management at the end of the first quarter were $840 billion. Asset management is a smaller department at Goldman than investment banking or trading, representing 8.8 percent of the firm’s 2009 revenue of $45.2 billion, according to company reports.
Alternative assets, such as commodities and real estate, can increase a portfolio’s overall return and lower risk. They’re gaining in 401(k) plans because more companies are creating their own custom target-date funds, said Callan’s Lucas. Target-date funds move money from riskier investments such as stocks to more conservative alternatives like bonds as an investor approaches retirement.
No Safe Havens
http://www.bloomberg.com/apps/news?pid=20601087&sid=aleNSNidU4Ms&pos=5
May 18 (Bloomberg) -- Goldman Sachs Group Inc., facing a fraud lawsuit from U.S. regulators who accuse the company of misleading investors, is trying to convince more Americans to trust the firm with their retirement funds.
The New York-based company is promoting alternative asset funds and designing target-date funds that provide guaranteed income to grab a bigger piece of the $2.7 trillion 401(k) market, said Bill McDermott, a managing director at Goldman Sachs Asset Management and head of its defined-contribution business.
“We understand risk and we understand asset allocation,” said McDermott, who joined the firm in February to strengthen its retirement-plan products and marketing. “We’re looking to leverage that for the 401(k) market.”
Goldman’s 401(k) plan assets totaled $17.5 billion as of March 31, according to the company. Fidelity Investments, the largest 401(k) asset manager, had $347.8 billion as of December 31. Assets in 401(k) plans are estimated to increase 41 percent, to $3.8 trillion, by the end of 2014, according to data from Cerulli Associates in Boston.
Goldman and BlackRock Inc., the world’s largest asset manager, don’t administer retirement plans and have been seeking more 401(k) business. The business has been dominated by firms such as Boston-based Fidelity and Vanguard Group, based in Valley Forge, Pennsylvania, which administer plans as well as manage assets.
‘Writing on the Wall’
“A lot of investment-only managers are trying to get in,” said Lori Lucas, defined contribution practice leader at San Francisco-based Callan Associates, an investment consulting firm. “They see the writing on the wall,” as traditional pensions are replaced by 401(k) plans.
Goldman’s move comes after an April 16 lawsuit brought by the U.S. Securities and Exchange Commission that accuses the firm of misleading investors in a mortgage-linked investment. Goldman denies those allegations and said it will fight the charges. A Senate panel grilled executives, including Chief Executive Officer Lloyd Blankfein, on April 27 about the case.
“Having issues certainly isn’t going to help. But all the signs so far are telling us that clients are sitting tight,” said Teresa Epperson, a partner at Mercatus, a Boston-based financial consulting firm. “Goldman’s capabilities are in trading strategies and hedging risks. The extension of those absolute-return strategies could be attractive to plan sponsors.”
Fiduciary Duty
The asset management division that McDermott works in is separate from the mortgage unit that sold the securities at the center of the SEC’s fraud suit against Goldman. A key difference between the two businesses is that the asset management division operates under a fiduciary duty to its clients, whereas the sales and trading division doesn’t.
“When a client gives us their money and their assets to manage, we are 100 percent their fiduciary, we must manage their money in the most prudent fashion possible using our best judgment possible,” Goldman Sachs President Gary Cohn said on May 11 at an investor conference in New York. “The rest of Goldman Sachs is not in the fiduciary business.”
Goldman’s total assets under management at the end of the first quarter were $840 billion. Asset management is a smaller department at Goldman than investment banking or trading, representing 8.8 percent of the firm’s 2009 revenue of $45.2 billion, according to company reports.
Alternative assets, such as commodities and real estate, can increase a portfolio’s overall return and lower risk. They’re gaining in 401(k) plans because more companies are creating their own custom target-date funds, said Callan’s Lucas. Target-date funds move money from riskier investments such as stocks to more conservative alternatives like bonds as an investor approaches retirement.
No Safe Havens
http://www.bloomberg.com/apps/news?pid=20601087&sid=aleNSNidU4Ms&pos=5
