When Goldman Sachs chief executive David Solomon last week unveiled his second major revamp of the bank since taking over four years ago, the biggest winner to emerge from the resulting corporate reshuffle was Marc Nachmann.
Having developed a reputation inside Goldman as one of Solomon’s most trusted fixers, Nachmann was rewarded with a job as head of a newly merged $2.4tn asset and wealth management division.
Combining the two businesses into one, scooping up more assets and squeezing out extra profits is a critical plank of Solomon’s plan to finally close Goldman’s stock market valuation gap with rivals such as Morgan Stanley and JPMorgan Chase.
“Our goal is to build an investment management business that will deliver world-class performance for our clients,” Solomon told the Financial Times. “The opportunities are enormous, and we’ve put in place a team of proven investors and operators to drive our strategy forward.”
Nachmann, 52, comes to the job with an unusual pedigree for a high-ranking Goldman executive. He is not particularly well known for his trading or investing expertise or Rolodex of contacts, but rather as a demanding behind-the-scenes operations manager who takes a tough approach to costs.
“He’s less a client guy and more a structural fixer,” said one Goldman banker. “It’ll hold him in good stead.”
Goldman president John Waldron told the FT: “If we are to grow from $2tn-plus to $3tn to $4tn, it will require the platform to be more durable and more automated. We need someone who could really knit this together operationally.”
Whether or not Nachmann succeeds is central to Solomon’s push to make Goldman less reliant on its two biggest engines, investment banking and trading. Although these businesses are lucrative, they are also volatile, and investors tend to bestow higher valuations on banks that generate more stable fee income by managing money for clients.
Jason Goldberg, banking analyst at Barclays, said Goldman’s arch rival Morgan Stanley had boosted its share price to trade at roughly 1.4 times its book value “in large part because it’s increased the contribution of asset and wealth management”. Goldman trades at just over book.
Goldberg added: “To the extent that [Goldman] could grow these higher return, more durable, less capital intensive businesses, it should improve its valuation over time.”
Nachmann joined Goldman in 1994 and became a partner 10 years later. He recently emerged as a top Solomon ally, known internally as one of the chief executive’s problem solvers. He co-led the group’s investment bank from London until 2019 when he replaced Marty Chavez as co-head of its securities division. During his tenure, annual revenues at the trading unit grew from $15bn to more than $20bn.
“Marc is very smart. He came into the securities division, which is the hardest division to run. He digs into detail,” one former colleague said.
Another ex-Goldman colleague described Nachmann as “David’s guy”, adding: “I don’t think Marc’s an investor. He’s a cost-cutter. That is what he does.”
Since his appointment last week, Nachmann has been out almost every night with clients while meeting during the day with Goldman executives from his newly formed asset and wealth division, said a person briefed on his schedule. That unit has become even more important to the group’s prospects because the company is scaling back its grand ambitions in retail banking.
In the third quarter, investment banking and trading generated 65 per cent of Goldman’s revenues. By comparison, those two businesses accounted for just 35 per cent of revenues at JPMorgan and 44.8 per cent at Morgan Stanley.
At the top of Nachmann’s to-do list is a daunting if unglamorous IT project. The bank plans to spend heavily on building a new technology platform it hopes will allow it to automate more of the tasks involved in managing money for investors ranging from institutions to rich individuals.
Key to this endeavour is Laurence Stein, the unit’s new chief operating officer, Waldron said. “The combination of Laurence and Marc are two important operators at the firm that can really run this as a unified business platform.”
At the end of September, the bank had $1.7tn in assets under supervision in asset management, or GSAM as it is referred to at Goldman, and a further $667bn in consumer and wealth management.
Goldman has been active in asset management since the 1980s and the business counts Rishi Sunak, the recently appointed UK prime minister, among its alumni.
For much of that time, the group’s strategy was focused in large part on investing the bank’s own capital, an approach that yielded enormous profits in some years but one which raised concerns among regulators and investors. Under Solomon, Goldman has tried to shrink its own investment portfolio and focus on managing funds for clients instead.
The division hopes to capitalise on the expected boom in wealth management by catering to rich individuals. Bain, a consultancy, expects the overall sector to significantly outpace traditional asset management and grow from $137tn in assets in 2021 to almost $230tn by 2030.
Solomon had signalled his ambition to bolster asset and wealth management with the acquisition of the investment management arm of Dutch insurer NN Group for about €1.6bn in 2021, as well as the $750mn purchase of wealth manager United Capital in 2019. The bank has also had some fundraising successes this year, attracting $9.7bn for a new flagship private equity fund.
But Nachmann has been handed the larger division and an all-male leadership team at a time when GSAM has been losing senior employees. The departed include a clutch of female bankers such as Katie Koch, chief investment officer of public equity; Heather Miner, chief operating officer of the division; and Heather von Zuben, global head of wealth management alternatives.
“The bid from outside GSAM for diverse talent is fierce,” said one person close to the bank. The situation, they added, “won’t fix itself until women are in seats of influence, authority and risk-taking, which seems a long way off based on the latest announcement”.
With Nachmann installed atop the new asset and wealth business, Julian Salisbury, former co-head of GSAM, will become chief investment officer. In what may be a reflection of the delicate balance of power between the two executives, both will report directly to Waldron.
“Julian is one of the best investors out there. He’s a tried and true, terrific risk manager, he knows how to run investment processes. He’s uniquely suited to serve as CIO,” Waldron said.
Bolstering the returns of the unit — which people say “is still run relatively inefficiently”, according to one Goldman insider — will be an immediate priority for Nachmann and Stein.
“Both of them have got reputations for improving efficiency through cutting costs,” the insider said. “Historically GSAM had a reputation for being a little sleepy and slow to make decisions.”