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Goldman Had a Killer Third Quarter. Its Asset Management Group Played a Big Role.

GSAM’s net revenues surged 71 percent over the previous year.

The Covid-19 pandemic didn’t seem to faze Goldman Sachs's third quarter, with the investment bank posting stellar results for the period.

One of the major bright spots for the bank was Goldman Sachs Asset Management.

GSAM posted a 71 percent jump in net revenues, to $2.77 billion, over the previous year and a 32 percent increase over the previous quarter, according to its earnings report. The bank attributed the hefty year-on-year gains to “significantly higher net revenues” in equities, as well as lending and debt investments. The asset management division earned a net gain on its public equity investments in the third quarter, compared with net losses for the same period a year ago. 

But the asset manager noted that the big year-on-year increase was partially offset by “significantly lower net gains” from its private equity investments. Lending and debt investments posted a net revenue increase on the back of performance gains, which GSAM attributed to tighter corporate credit spreads during the third quarter. GSAM earned $1.42 billion in revenue from equity investments and $589 million from lending and debt investment revenue for the quarter. 

Higher management and other fees from its institutional and third-party distribution asset management clients also contributed, although the bank said incentive fees were essentially unchanged. GSAM reported $728 million in management fee revenue during the third quarter and $28 million in incentive fee revenue.  

“The increase in management and other fees reflected the impact of higher average assets under supervision, partially offset by a lower average effective management fee due to shifts in the mix of client assets and strategies,” GSAM said in the report. The division managed $1.46 trillion as of the end of the third quarter. 

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The bank posted an overall profit of $3.62 billion, or $9.68 per share, on net revenues of $10.78 billion, trouncing analysts’ expectations. That’s roughly double the $4.79 earnings per share the bank posted in the year-ago quarter. 

Net revenues jumped 30 percent year-on-year, although they slid 19 percent from the second quarter. Goldman said the increase over last year came from higher net revenues across all segments. 

“The operating environment continued to recover during the third quarter of 2020 from the impact of the Covid-19 pandemic earlier in the year as global economic activity significantly rebounded following a sharp decrease in the second quarter, market volatility declined modestly, and monetary and fiscal policy remained accommodative,” GSAM stated in the report. “As a result, global equity prices increased and credit spreads tightened compared with the end of the second quarter of 2020.”

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