Goldman Sachs Asset Management doesn’t feel obliged to wheel out star fund managers to wow potential investors. When an investment consultant was disappointed a product specialist was brought to a pitch, head of international third party distribution Nick Phillips told them they’d rather fund managers were spending their time on managing money rather than courting new money. GSAM won the pitch.
The asset manager, which manages $1.4trn globally, likes to champion the team approach. Phillips uses fixed income as an example. “You’ve got the credit portion, the government portion, the rates portion, etcetera. Each one of those has a risk taker and they’re allocated a portion of the risk budget and they will use that in line with their current view and their current conviction.”
Phillips is responsible for non-US funds and GSAM’s sub-advisory business. The latter, a growing part of GSAM’s third party distribution, has $70bn under supervision with mandates across all asset classes, from multi-asset to global fixed income, equity and alternative strategies. Increasing regulatory pressure in the industry could lead distributors away from off-the-shelf-funds into a sub-advisory model through vertical integration, Phillips says.
In the $54.8bn Sicav range bonds and emerging markets dominate the largest funds topped by the $7.3bn Emerging Markets Debt portfolio. The $2.1bn Emerging Markets Equity and $2bn Emerging Markets Debt Local funds also feature alongside the $2.4bn India Equity portfolio. In fixed income the $5.5bn Global High Yield and the $4.4bn Global Strategic Income Bond portfolios complete the top three. Overall the asset manager offers 63 Ucits products.
“We have a strong product offering with emerging market debt hard currency, emerging market debt local and emerging market corporate bonds. That business has grown primarily because the performance of us as managers has been exceptionally good within the peer group,” Phillips says.
The GS Emerging Markets Debt and Emerging Markets Equity portfolios rank fourth and second quartile respectively over one year, but top quartile over three years, according to FE. The Emerging Markets Debt Local portfolio on the other hand ranks first quartile over one year, but third over three. All three funds are team managed.
However, the emerging market equity team, which has been in place in its current format for three years, lost Prashant Khemka, its CIO for emerging markets, in April as he sets up his own firm. Basak Yavuz and Hiren Dasani have replaced him, reporting to Sam Finkelstein, who took up the newly created role of head of emerging markets following Khemka’s exit. The team is responsible for $47.1bn.
GSAM’s Computer Optimised Research Enhanced (CORE) range has also been a strong source of inflows, Phillips says, describing it as “factor-based active equity”. This includes the $3bn GS Global CORE Equity portfolio and the $1.5bn Europe CORE Equity portfolio. Phillips says the latter, albeit less popular with UK investors as a pan-European product, had just $250m at the start of the year, sextupling in size since.
When it comes to net sales for active cross-border Ucits funds, GSAM comes in fourth with €5.8bn year to date, behind Pimco, Allianz and BNY Mellon, according to Strategic Insight. The $2.4bn GS India Equity portfolio, managed by Hiren Dasani, has delivered the third best year-to-date flows for the category, attracting $183m. It’s returned 26.6 per cent over the last year and 102.3 per cent over the last three, according to FE.
GSAM only offers Sicav products, which Phillips concedes used to be an issue for UK investors. “Pre-RDR a Luxembourg fund or a Dublin fund was different to a unit trust or an OEIC. Now RDR pricing is in place. You’ve got an OCF. For us we launched a range of clean share classes five years ago. Our pricing is very competitive. We didn’t have a legacy book of business and clearly that was a benefit to us. We were able to price our R-share class at exactly the same point as our institutional share class.”
Covering a wide range of international markets ex-US is “enormously” advantageous for keeping on top of the direction of travel in the industry, Phillips says. “The perfect example is Mifid,” he adds, noting it follows on from RDR in the UK and the Future of Financial Advice (FoFA) in Australia. The Netherlands, South Korea and South Africa also have equivalent regulation, he says.
“It’s regulation that is not dissimilar from each other, which I think we learn a lot from with what happens in those places in terms of product design and product outcomes. The growth of model portfolios and multi-asset portfolios in the UK post RDR is the perfect example of what may follow in continental Europe. The growth of multi-asset and model portfolios post-FoFA in Australia was very similar,” he says.
In turn these products have driven demand for alternatives with some global private banks adding up to 20 per cent of their portfolios to these types of strategies, Phillips says. “One of the services we do within the portfolio construction team is we will take a client portfolio and we will add different asset classes so they can look at the volatility of the portfolio and the expected return of the portfolio.”
GSAM launched the GS Global Absolute Return portfolio in August 2015, which Phillips compares to the Standard Life Global Absolute Return Strategy. The $157m has returned 3.2 per cent since launch compared to 4.8 per cent in the IA Targeted Absolute Return sector and 0.5 per cent in GARS, FE data shows. Phillips says they have two or three products in the pipeline to be released before the end of the year although they still require regulatory approval so he is tightlipped on details.
While Goldman Sachs Group is reportedly planning to move up to 1,000 jobs to the EU on Brexit, Phillips predicts the implications for GSAM will be minimal, pointing to their significant existing presence across markets. “We’re building a number of contingency plans depending on how the negotiations go. At the moment there’s no real information to be able to make a decision.”
“We have a Luxembourg Sicav range so from a fund distribution perspective nothing in Europe is going to be affected. We have an Italian sales team dealing with Italian clients with a Luxembourg Sicav so from their perspective that’s not going to change.”
However, he says clients on the continent view Brexit with varying levels of frustration. “I think they look at it more from a distance and think about the political landscape and wonder what it means for them.”
Managing director, Chelsea Financial Services
Although it was established in 1988, GSAM is a relatively ‘new’ player in the UK retail market. Importantly, the effort the company has made in terms of intermediary service and marketing has been superb. GSAM is particularly strong in emerging market equities and bonds and a favourite fund of ours is the India Equity Portfolio. Losing their head of emerging market equities recently was a blow, but the team is still very strong. With 19 qualifying funds across all equity markets, it was awarded an ‘Elite Provider for Equities’ rating this year from FundCalibre. GSAM also has, real estate and commodity products to offer, but equities are definitely their forte.
Research manager, Chase de Vere
Goldman Sachs Asset Management, well known for its investment insight, is part of a group steeped in financial services heritage. It takes a team approach to the management of its wide range of funds spanning fixed interest, equity, alternatives and mixed assets, some of which are managed on a quantitative basis. So in theory it has something to offer everyone but this has yet to translate to any great degree into the retail market in the UK, perhaps due to the Luxembourg domicile, so it remains better known among high net worth individuals, family offices and institutions for the time being.
Head of fund selection, AJ Bell
For a business of its scale and reputation, GSAM has punched below its weight in the UK retail market despite having a number of strongly performing funds. A lack of brand presence has probably contributed to this against more prominent retail brands but there is certainly a base of capabilities to build on. In equities, US and Europe look like strong propositions, and until the recent departure of Prashant Khemka, emerging markets also looked strong. With a number of well priced funds, a strong parent company and good performance, GSAM is a group that fund selectors should probably take a closer look at.
GSAM in numbers
$54.8bn AUM in the Sicav range
$7.3bn The largest fund in the Sicav range is the Emerging Markets Debt portfolio
3.2% Returns from GS Global Absolute Return portfolio compared to 0.5% from rival SLI GARS over the period.
63 Ucits funds offered by GSAM