Goldman Sells Hedge Fund Admin Unit
Goldman Sachs Sells Fund Administration to State StreetGoldman Sachs (GS) has sold its hedge fund administration business to State Street for $550 million cash. The business was not hugely profitable and represented only a small part of Goldman Sachs' business. Goldman will continue to offer prime brokerage services to hedge funds. State Street has further solidified itself as a top hedge fund administration firm, becoming the leader globally with this acquisition.
For Goldman, it was a relatively small business that does not impact its ability to continue catering to hedge funds as a prime brokerage unit, which it views as an important business. (The move also has nothing to do with the so-called Volcker Rule, which restricts Goldman’s ability to use its own money in trading and investing in hedge funds.)
Chief Financial Officer David Viniar told analysts on Goldman’s earnings conference call that the unit had little capital tied up in it and wasn’t material to the company.
“There was not a lot of revenue and earnings associated with it,” Viniar said of the business. “It’ll have a very immaterial effect on our business going forward.”
Viniar added the majority proceeds from the sale will be booked as a gain, delivering Goldman a chunk of cash when the deal closes, expected in the fourth quarter.
Goldman has had some headaches from similar operations that handle basic functions for hedge funds and brokerages, including several large payouts for actions the bank’s operations allegedly should have caught.
But for State Street, the business fits its core operations: the behind the scenes workings of Wall Street. Source