Goldman No Longer Confident It Can Sell Fund Stakes by Deadlineby
Bank has $7 billion of private-equity, hedge fund holdings
Federal Reserve pushed back Volcker rule deadline last month
Goldman Sachs Group Inc. may struggle to profitably unload its holdings in private-equity firms and hedge funds by a July 2017 deadline set by the Federal Reserve under the 2010 Dodd-Frank Act.
The Wall Street bank, which has about $7 billion of such alternative assets, said in its first-quarter regulatory filing in May that it could “exit the majority of such interests in these funds in orderly transactions” before the July 21 deadline. The company omitted that language in its second-quarter filing on Thursday and said that it could be forced to sell such assets at a discount.
Goldman Sachs, which typically invested in private-equity and hedge funds alongside clients before Dodd-Frank’s Volcker rule limited such activities, has cut the total amount of its stakes by a little more than half in the past six years. Volcker limits a bank’s total investments in such funds to 3 percent of its Tier 1 capital. Based on Goldman’s $81.1 billion of such capital at midyear, it would have to reduce its holdings to about $2.4 billion.
Last month, the Fed pushed back the deadline by a year to 2017 and said it will “provide more information in the near term” whether it will take further action on banks’ most illiquid investments in private funds. Dodd-Frank provided banks a chance to seek five-year delays for individual funds that would be the most difficult to sell.
Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment beyond the filing.