Goldman Sachs Group Inc., the fifth-biggest U.S. bank by assets, redeemed about $250 million from hedge funds during the first quarter as it begins to comply with rules requiring banks to reduce such investments.
The firm can “generally” redeem as much as 25 percent of its holdings in hedge funds at any quarter-end with 91 days’ notice, New York-based Goldman Sachs said in a quarterly filing today. The company had $3.06 billion in hedge-fund stakes at the end of March, according to the filing, which didn’t say which fund investments were pulled during the quarter.
Under the Volcker rule provision of the Dodd-Frank financial-reform law, federally backed banks are required to limit their investments in private equity and hedge funds to no more than 3 percent of the fund or 3 percent of the bank’s Tier 1 capital. Goldman Sachs’s fund stakes were worth $17.2 billion at the end of March and the firm was committed to providing an additional $7.77 billion to the funds, the filing showed.
“We currently expect to redeem up to approximately 10 percent of certain hedge funds’ total redeemable units per quarter over 10 consecutive quarters, beginning March 2012 and ending June 2014,” Goldman Sachs said in the filing. “In addition, we have limited the firm’s initial investment to 3 percent for certain new funds.”
The fair value of Goldman Sachs’s stakes in private-equity funds totaled $8.83 billion at the end of March and the company owed the funds $3.07 billion in “unfunded commitments,” according to the filing. The value of private debt fund investments amounted to $3.74 billion. Unfunded commitments to those funds totaled $3.24 billion, according to the filing.
“The firm continues to manage its existing private-equity funds taking into account the transition periods under the Volcker rule,” according to the filing.
Stakes in real estate funds were worth $1.54 billion at the end of March and the bank owed $1.46 billion to those funds, according to the filing.
Goldman Sachs’s investments in private-equity, private debt and real estate funds aren’t eligible for redemption, according to the filing. The firm expects to receive distributions from the funds as their underlying assets are sold, “and it is estimated that substantially all of the underlying assets of the existing funds will be liquidated over the next 10 years,” according to the filing.