WEBVTT - Goldman Sachs Asset Management Head Marc Nachmann Talks Third-Party Fundraising

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News. I'm Shanalie Bassek, and

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<v Speaker 1>I'm standing here at the Goldman Sachs Financial Services conference

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<v Speaker 1>over here now with Mark Knackman, who's a global head

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<v Speaker 1>of asset and wealth management at Golden Sachs. This is

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<v Speaker 1>the big growth THEORYA. This is the focus that Goldman

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<v Speaker 1>has been kind of honing in on. And you have

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<v Speaker 1>set out a plan to be less balance sheet intensive

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<v Speaker 1>and focus more on that third party fundraising a third

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<v Speaker 1>party business. How far along in that journey are you,

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<v Speaker 1>especially when you have some ambitious plan to even double assets.

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<v Speaker 1>That's some part of the.

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<v Speaker 2>Business, that's right. We set out an ambitious plan at

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<v Speaker 2>the beginning of last year when we formed Asset in

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<v Speaker 2>Valves Management. We had to invest a day in February

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<v Speaker 2>set out some targets, and I think we're well on

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<v Speaker 2>albay on meeting and exceeding a number of them. You know,

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<v Speaker 2>the key was growing durable revenue is high single digits.

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<v Speaker 2>We've done this were the last seven quarters, getting our

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<v Speaker 2>pretax margin into the mid twenties. We're now at twenty

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<v Speaker 2>four percent, so we're well on our way. And as

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<v Speaker 2>you mentioned, we had a couple of targets in terms

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<v Speaker 2>of reducing our balance sheet intensity and fundraising. On the

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<v Speaker 2>balance sheet we at the time, but last year we're

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<v Speaker 2>at thirty billion dollars of our historical principle balance sheet.

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<v Speaker 2>We had a target to get to fifteen billion by

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<v Speaker 2>the end of this year. We're going to exceed this.

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<v Speaker 2>You know, at the end of the third quarter we

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<v Speaker 2>were around twelve billion, so we'll continue to make progress

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<v Speaker 2>by the end of the year. So if you feel

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<v Speaker 2>really good about reducing the balance sheet. At the same time,

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<v Speaker 2>we've had a very good time raising funds in the

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<v Speaker 2>alternative area. We had a target of two hundred and

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<v Speaker 2>fifty billion dollars of fundraising, which we've met. We expect

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<v Speaker 2>now this year to raise more than sixty billion dollars

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<v Speaker 2>of alternative assets. So we feel very good about the

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<v Speaker 2>transition from the balance sheet intensive business balance sheet lighter business.

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<v Speaker 2>And at the same time, you know, continue to grow

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<v Speaker 2>our management fees and we feel good about exceeding our

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<v Speaker 2>target of the ten billion dollar number for this year.

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<v Speaker 1>I'm really curious about the private credit card in particular

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<v Speaker 1>because you look over across the across the island over

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<v Speaker 1>in Manhattan, and you see black Rock making an acquisition

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<v Speaker 1>for HPS to get much bigger in the private credit space.

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<v Speaker 1>How does that make you think about the future of

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<v Speaker 1>M and A in this business. Do you think that

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<v Speaker 1>you need that MNA to get much bigger in private credit,

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<v Speaker 1>especially when you yourself have a plan to more than

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<v Speaker 1>double assets in that business to three hundred billion dollars.

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<v Speaker 2>We feel really good about our position. We're a scale

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<v Speaker 2>player in private credit. We've been in the business for

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<v Speaker 2>thirty years. We launched our first mezzanine FUNT in nineteen

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<v Speaker 2>ninety six, so we've been experienced players throughout the second

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<v Speaker 2>We're in a very unique place where we're scale player,

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<v Speaker 2>but we're also closely attached to the world's leading investment bank.

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<v Speaker 2>And so when you think about that, you know the

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<v Speaker 2>origination capability we have, which is one of the key

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<v Speaker 2>things when you think about private credit, it's unmatched. And

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<v Speaker 2>so I think we think we have what it takes

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<v Speaker 2>to continue to grow, and we have the scale right

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<v Speaker 2>now and we think we're going to be able to

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<v Speaker 2>more than double the business over the next few years.

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<v Speaker 1>Does that mean M and A is off the table,

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<v Speaker 1>whether it is in private credit or another area.

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<v Speaker 2>I'd say generally speaking, we have very strong growth opportunities

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<v Speaker 2>that are organic, and so we're very focused on those.

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<v Speaker 2>We're obviously paying attention to what's going on in the market,

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<v Speaker 2>and so if we see something that could accelerate our

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<v Speaker 2>gross we will take a look at it, but the

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<v Speaker 2>by bar will be high.

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<v Speaker 1>What do you make of the not just private business,

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<v Speaker 1>but the public business here, because in addition to doubling

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<v Speaker 1>down on private assets, you've been doubling down on the

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<v Speaker 1>ETF business as well, making notable hires, including from JP Morgan.

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<v Speaker 1>Does that mean you're setting out to compete and be

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<v Speaker 1>much much bigger in this business and take on the

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<v Speaker 1>likes of JP Morgan and black Rock.

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<v Speaker 2>Yes, I think we are. I think on the on

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<v Speaker 2>the traditional business, I would say we're very focused on

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<v Speaker 2>the solutions orientation there and so I think we are

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<v Speaker 2>a leader in SMAs and you know we already have

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<v Speaker 2>a very strong position. We want to become a leader

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<v Speaker 2>in active ETFs. I think it really our heritage is

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<v Speaker 2>be active asset managers across both the traditional on the

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<v Speaker 2>alternative side, so we're very focused on that. We've launched

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<v Speaker 2>ten new ETFs this year. We're going to launch a

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<v Speaker 2>number of ETFs next year, so we're going to grow there.

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<v Speaker 2>I think we see a greater adoption of ats just

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<v Speaker 2>in general, but also within models. I think one of

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<v Speaker 2>the things that our clients are really interested in is

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<v Speaker 2>having model portfolios and getting Goldman Sachs model portfolios, and

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<v Speaker 2>ETFs tend to be parts of these of these model

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<v Speaker 2>performers as well as SMAs, and so I think we've

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<v Speaker 2>think this whole solutions space, the whole model space is

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<v Speaker 2>a big growth area for us.

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<v Speaker 1>When you think about the path forward here, what are

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<v Speaker 1>clients one at the end of the day, are they

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<v Speaker 1>looking more to be in those public markets or the

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<v Speaker 1>private ones? How do you differentiate where there's going to

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<v Speaker 1>be the most growth in the next five ten years.

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<v Speaker 2>I think clients want a combination. I think it's interesting.

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<v Speaker 2>We obviously have a very big boss manager that is

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<v Speaker 2>focused on the Altrahi network segment, and so we see

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<v Speaker 2>asset allocation there, and I'd say people want a combination

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<v Speaker 2>of public and private assets, and I think it's important

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<v Speaker 2>to have that combination and have the ability to move

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<v Speaker 2>between those two sides.

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<v Speaker 1>Do you believe that there can be this great convergence

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<v Speaker 1>where public markets look more like private markets and vice versa,

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<v Speaker 1>or do you think they have to be separate.

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<v Speaker 2>I think I think it will get more and more blurred.

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<v Speaker 2>I think the difference between between the two markets. I

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<v Speaker 2>think it's interesting. You see some private credit deals that

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<v Speaker 2>trade secondary and so you see some liquidity in sound

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<v Speaker 2>of these deals, and so I think there's you know,

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<v Speaker 2>there's you know, there's a lot of discussion. We've participated

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<v Speaker 2>a lot in private company that have equity that is

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<v Speaker 2>broadly distributed to employees. For example, employees want liquidity. There's

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<v Speaker 2>mays to create liquidity for private companies, and so that

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<v Speaker 2>always blurring the line between what are private liquid assets

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<v Speaker 2>and what are public liquid assets.

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<v Speaker 1>Now, the other big business you have, and we were

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<v Speaker 1>just talking about this in the commercial break, big money

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<v Speaker 1>market business. You think about that wall of money still

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<v Speaker 1>sitting in money markets. There's a big investor expectation that

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<v Speaker 1>that moves. Have you seen it? Are you seeing it

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<v Speaker 1>as rates start to fall?

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<v Speaker 2>I think when I look at our money market business

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<v Speaker 2>this year, we've not seen material outflows into equity from

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<v Speaker 2>their money mask. So a lot of people still keep

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<v Speaker 2>their money market money markets yields are still pretty attractive.

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<v Speaker 2>I would also say that our business is probably more

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<v Speaker 2>tilted towards institutional and corporate clients versus retail clients, but

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<v Speaker 2>we still see people holding on to their money market

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<v Speaker 2>assets for the time being.

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<v Speaker 1>Now you don't just run the asset management business, you

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<v Speaker 1>also run the well business. This has also been targeted

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<v Speaker 1>as a growth area for Goldman's Acts. When you think

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<v Speaker 1>across the world, where are you going to grow? Are

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<v Speaker 1>you going to hire significantly to get that job done?

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<v Speaker 2>Yes. So we have a long history of growing our

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<v Speaker 2>weals business, you know, high single digits for many years,

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<v Speaker 2>really based on great investment performance and a great client experience,

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<v Speaker 2>and I think those are kind of the key two

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<v Speaker 2>pillars driving our weals business, and we're very committed to

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<v Speaker 2>continue to growing it both in the US as well

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<v Speaker 2>as internationally. So we have kind of a long term

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<v Speaker 2>plan to add advisors both in the US as well

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<v Speaker 2>as in Europe and Asia. We've done this this year,

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<v Speaker 2>we'll continue doing it next year and the day often,

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<v Speaker 2>so we're going to consistently growing that business. We're also

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<v Speaker 2>expanding our private bank capability, which is something we had

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<v Speaker 2>historically done less and so we're going to We're getting

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<v Speaker 2>better in lending in that business, which is a very

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<v Speaker 2>good attractive business to be in. Both of the advisor

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<v Speaker 2>grows as well as the expansion of the private bank

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<v Speaker 2>on top of good investment performance and client experience will

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<v Speaker 2>allow us to continue to grow this business.

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<v Speaker 1>If I know anything about you is that you're a

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<v Speaker 1>man who focuses on the numbers. Where are you wanting

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<v Speaker 1>to be number one tomorrow that you are not today?

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<v Speaker 2>Look, I'd say, have we talked about private credit. We

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<v Speaker 2>have a great private credit franchise. We have a kind

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<v Speaker 2>of top five alts franchise. Overall, we want to move

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<v Speaker 2>up there in the ranking we have. We're a top

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<v Speaker 2>five active asset maague. On the public side, we want

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<v Speaker 2>to move up in the ranking. This goes to ETFs

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<v Speaker 2>and model portfolios and other solutions parts of the business.

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<v Speaker 2>I'd say, the interesting thing about the Belt's business, our

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<v Speaker 2>wealth business is entirely focused on the ultra high networks segment.

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<v Speaker 2>We think we're a leader in that industry. There's not

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<v Speaker 2>a lot of good data around where exactly we rank,

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<v Speaker 2>but we think we're a top player in globally in

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<v Speaker 2>that business. But we definitely want to be the number

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<v Speaker 2>one ultra high networst player globally.

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<v Speaker 1>We're looking forward to following that story that is Mark Knockman.

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<v Speaker 1>He is the global head of Asset and Wealth Management

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<v Speaker 1>over here at Goldman Sachs