Clients of the Goldman Sachs wealth management business may be hurting more than most. Over the past year, the equities category of the assets Goldman manages for clients declined 43%. That far outpaces the decline in the S&P 500 over the period (down 28%) and is dwarfed by gains Goldman made by trading stocks for its own account.
So why did the stock portfolio of Goldman’s clients shrink? At first we thought that this might be due to people withdrawing their money in the great panic of 2008 and the first quarter of this year. But Goldman says that withdrawals were only a small part of the decline. Instead, Goldman’s clients kept their money with the investment bank but that money shrunk because the value of their investments declined.
Ouch! What makes the underperformance of the Goldman client equities portfolio so striking, especially when compared to the outperformance of its principal trading operations, is that many of the clients are current or Goldman partners. Although we don’t have hard numbers on this, people familiar with the situation tell us that a good portion of the clients are current or former Goldman employees and their families.
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