* About $15 billion in funds covered by Volcker
* Volcker Rule allows up to 3 pct of Tier I capital to be
* Goldman CFO: There are going to be 3 percent funds
By Steve Gelsi
Jan 22 (Buyouts Magazine) - Goldman Sachs is expecting to
steer clients toward so-called "3 percent funds" as it takes aim
at its large private equity business, with about $15 billion in
assets on its balance sheet that come under Volcker Rule
The rule, which took effect in December, led Wall Street
analysts to pose several questions to Goldman Sachs CFO
Harvey Schwartz on the firm's quarterly conference call on Jan.
Roger Freeman, an analyst at Barclays Capital, wondered if
the firm has enough clarity around all the rules to step up
investing if it sees opportunities.
"The short answer is yes," Schwartz said. "The opportunity
set is going to be driven by what we see, working with our
clients and being very disciplined about returns, as we have in
the past. In terms of the rule set, gives a road map for
the various alternatives under which you can undertake the
activities. You can investclients in 3 percent funds."
Looking ahead, Schwartz said a top-level implementation team
is in place to work through Volcker rule requirements.
One of the challenges for banking entities will be figuring
how to deal with current, covered funds that they have
sponsored, said Bill Stern, partner at Goodwin Procter.
"There is an exemption that allows banking entities to
organize and offer a covered fund to customers as part of an
asset management business, but it's not entirely clear how that
exemption can be applied to pre-existing funds," Stern said in
an email to Buyouts.
Goldman has been working on direct investments with
investors and thus avoiding ownership restrictions covering
private equity funds, according to reports published last year.
As one of the largest players in the private equity arena,
Goldman Sachs raised nearly $25 billion for its principal
investments in 2012-13, according to industry estimates.
That effort came prior to the implementation of the Volcker
Rule, part of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, aimed at separating private equity, investment
banking and proprietary trading.