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Asset Management: Goldman’s latest blow to asset management ambitions

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Julian Salisbury swaps Goldman for Sixth Street

Goldman Sachs has suffered another senior departure from its asset management business. Julian Salisbury, chief investment officer of the bank’s asset and wealth management division, is leaving to join $65bn alternatives firm Sixth Street as partner and co-chief investment officer.

Salisbury’s exit marks the latest from Goldman’s asset management business and is a blow to chief executive David Solomon’s efforts to build up the division, write my colleagues Joshua Franklin and Antoine Gara in New York. Other senior executives who have left within the past year include Katie Koch and Luke Sarsfield. Takashi Murata, co-head of Asia Pacific private investing, is also departing the bank.

Goldman’s asset and wealth management businesses were combined in October and they form the cornerstone of Solomon’s efforts to diversify the firm’s business away from investment banking and trading. It’s worth rereading our profile of Marc Nachmann, who was promoted to run the newly merged division, and was a big winner from the reshuffle. 

Goldman has been active in asset and wealth management for decades and has $2.7tn in assets under supervision across equities, private equity, credit and fixed income. But the division’s revenues are much smaller than its core investment banking and trading business, which investors view as unpredictable and attract a lower stock market valuation. 

The asset management division for years made much of its profits from investments Goldman has made with its own capital. The bank is in the process of shrinking this business, which it blames on its volatility and treatment by regulators.

It is trying to earn more money from the outside funds it manages, raising more than $200bn in gross third-party funds since 2020, with a target of $225bn by 2024.

Salisbury, who has been at Goldman for 25 years, was co-head of the Wall Street group’s asset management division until last year but his role changed to chief investment officer in the reorganisation. Goldman does not plan to replace him.

Nachmann told the Financial Times:

“When you look at what’s happened over the past 12 months and how we’ve reformulated the business, it wasn’t surprising to the partners in the business that people have left. We feel pretty good about the set-up we have.” 

Sixth Street, meanwhile, has become one of the most active private capital firms in lending to corporate buyouts and investing in the media rights of top football clubs including FC Barcelona and the stadium of Real Madrid

Salisbury’s move will reunite him with his close friend Alan Waxman, who is chief executive of Sixth Street. The two backed the takeover of Swiss communications company Cablecom while they worked together at Goldman in the early 2000s. Now Salisbury is expected to help lead the San Francisco-based investment group’s operations outside of the US. 

Why Rajiv Jain is betting on an Indian yoga televangelist

Rajiv Jain, founder of $93bn asset manager GQG, has made a second high-profile investment in an Indian company this year. This time it’s a business run by a rightwing, yoga televangelist with ties to India’s prime minister, report my colleagues Ortenca Aliaj in London and Chloe Cornish in Mumbai. 

Months after investing $2bn in the embattled conglomerate of infrastructure tycoon Gautam Adani, following a scathing report by short seller Hindenburg Research, Jain’s $300mn investment in Baba Ramdev’s Patanjali Foods recently became public. 

Jain’s main argument when he defends the investment? Growth. “There is no political angle,” Jain told the Financial Times. Instead, he said he wants Patanjali to continue selling nutritional supplements, biscuits and ghee as fast as possible to as many people as possible rather than follow other fast-moving consumer goods companies in their pursuit of margin — “that I think is their Achilles heel,” he said. 

“Just like Adani, there’s this negative halo effect for anything that is connected to Modi,” said Jain, adding that the current Indian government is the most hands off in terms of business the country has seen in decades.

Jain said GQG had been looking at Patanjali for several years and commended Ramdev’s business acumen. “For a school dropout he will rattle off margins at every division and the guy does yoga half the day,” he said. “He’s very impressive.” 

Baba Ramdev campaigned alongside Narendra Modi, helping propel him to victory in national elections in 2014 © Arvind Yadav/Hindustan Times via Getty Images

Swami “Baba” Ramdev, whose YouTube channel has almost 10mn subscribers, shot to national fame in India through his televised yoga classes. But he has also courted controversy for his support of rightwing Hindu causes and views on homosexuality, which he previously referred to as a disease curable by yoga.

Ramdev has also been closely associated with Modi’s ruling Bharatiya Janata Party. He campaigned alongside Modi in 2014, helping propel him to victory in the national elections and leading crowds in chanting slogans associated with Hindu nationalist ideology. But in 2019, the yogi insisted he had “withdrawn myself politically” and would not be endorsing a party. 

“He’s a provocative figure so he does make these comments but that doesn’t change the underlying business momentum,” said Jain. “There’s a professional team underneath who run the business.” 

Indian media reported that Ramdev was forced to apologise last year for saying women “look good when, like me, you wear nothing”, after opposition politicians criticised the remarks as insulting to women.

“I’m sure [Ramdev] made some statements but I mean who doesn’t?” said Jain. “Companies make random statements, it doesn’t mean that the company is not a buy anymore. Look at, for example, Elon Musk.”

Read the full story here

Chart of the week

Line chart of yield (%) showing hedging costs make foreign bonds unappealing for Japanese investors

The Bank of Japan’s latest relaxation of its cap on bond yields will enhance the returns on offer on the country’s debt, leading some investors to forecast that a “great repatriation” of Japanese investment flows is set to accelerate, write Mary McDougall and Daria Mosolova in London. 

The policy shift comes at a time when overseas debt has become an increasingly unappealing prospect for many Japanese investors because of the soaring cost of hedging against swings in the value of the yen.

Many big Japanese investors, such as insurers, routinely hedge their currency exposure when they buy foreign bonds. Rising interest rates in the rest of the developed world have sharply driven up the cost of doing so, more than cancelling out the growing yield gap between Japan and other economies, making Japan’s low-yielding bond market appear relatively attractive.

The currency-hedged yield on a 10-year Treasury fell below the equivalent Japanese bond yield late last year, according to data from Apollo, and a gulf has opened between the two markets since then.

“It hasn’t made sense for Japanese investors to own Treasuries and [German] Bunds, they would rather buy Japanese government bonds — which is what everyone was doing,” said Mohit Kumar, managing director at Jefferies.

Five unmissable stories this week

Singapore’s GIC, one of the world’s largest institutional investors, has warned that the golden age for private equity firms has “come to an end”. The sovereign wealth fund, which has estimated assets of more than $700bn and is one of the largest backers of buyout funds, said a new era of higher interest rates and volatility had created challenges.

BlackRock has struck a joint venture with the financial services arm of Indian tycoon Mukesh Ambani’s empire to launch a digital-first asset manager aimed at serving India’s growing investor population.

St James’s Place, the UK’s largest wealth manager, is to lower fees on a broad range of investment products, denting its forecast profits and prompting the steepest decline in the FTSE 100 company’s share price in seven years. 

DWS is braced to pay €21mn to regulators as Germany’s largest asset manager tries to draw a line under multiple investigations into a greenwashing scandal that has dogged the group for more than two years.

Sculptor Capital Management, once one of the world’s largest hedge funds, has agreed to be sold for $639mn in a takeover that ends a bitter fight between its billionaire founder Daniel Och and his former protégé Jimmy Levin.

And finally

© David Hockney

A charming exhibition at the Wallace Collection in London explores our devotion to four-legged friends across the centuries. Portraits of Dogs: From Gainsborough to Hockney brings together over 50 paintings, sculptures, drawings, and even taxidermy.

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