The Goldman Sachs Group, Inc. (GS) Earnings Call Transcript & Summary

All right. Good morning, everyone. We'll get started with our next session. I'm pleased to have Goldman Sachs once again at the conference. Today, we have John Waldron, President and Chief Operating Officer of Goldman. Welcome back, John, to the conference and great to see you again.

Thank you, Christian. It's good to be here. It's always good to be here.

Fantastic. So Goldman will have a breakout session right after this. So you can save your questions for that session. And we'll dig straight in.

John, I think this time last year, you called the macro backdrop among the most complex and dynamic you've seen in your career. Curious how you view the current macro backdrop and sort of how that impacts Goldman's businesses?

Sure. I think last year was -- there was a lot of weather analogies, so we're not going to use weather analogies. But I would maintain that position that the macro backdrop is extraordinarily challenging and dynamic. Lots of cross currents. I would say we observed a pretty risk off-tone from our clients. I would think about institutional clients, generally speaking, particularly leading into this debt ceiling debate. It looks like we're going to -- knock on wood, we're going to get through the debt ceiling, but people have been pretty -- more hands in their pockets, kind of more neutral positioning, trying to sort of see how things play out. And then CEOs, I would observe, are pretty cautious. They've been probably pleasantly surprised with the resilience of the demand function, particularly on the Consumer side. But generally speaking, pretty cautious in their forward planning. And so we sense a real risk off tone on both sides of the ledger, if you will. And I think as we get through the debt ceiling, we're going to get back into a more pronounced debate about the trajectory of inflation, the trajectory of rates and the trajectory of GDP, and that's still an unresolved combination of trajectory. So that's definitely, I think, still weighing on our client base pretty -- in a pretty pronounced way. I think there's a big debate about the consumer. I'm sure you've had a lot of consumer companies who's listening to Estee Lauder ahead of this session, a lot of debate about how resilient they will continue to -- this consumer will continue to be. The consumer is 70% of the U.S. economy, so it kind of does determine whether we're going to go into a recession or not. We see signs in talking to our clients of some change in behavior. There's not real stress yet, but you can see substitution, you can see more private label. If you listen to some of the earnings reports from the consumer-driven companies, it does feel like the back half of the -- the last few months have been weaker than the first handful of months this year. And so we, generally speaking, are pretty cautious about what we think is going to happen with the U.S. consumer. I don't know whether to predict we're going to have a recession or not have a recession, but it feels like we're going to have a contractionary environment for a period of time. And then geopolitics, obviously, kind of weigh heavily. Ukraine, China being probably the 2 most prominent component pieces of the politics, which, to my mind, is mostly felt in supply side challenges, whether it's energy or just broad supply channels, if you will, around the world being reset, which is definitely creating more constraint in the context of economic activity. So it feels pretty difficult out there right now and challenging. You could paint a more optimistic second half of the year if you wanted to, but we're -- I would say we're more cautious. We're running the firm tighter. We started -- you'll remember at the beginning of the year that we made some moves on headcount. We came into the year with the assumption that 2023 would be a softer, tougher year. It's generally speaking played out that way. Activity levels are definitely more muted. That's kind of what we expected. We are now embarking upon additional targeted actions with our headcount. We, at our Investor Day and then on our earnings call, talked about getting $1 billion of efficiencies this year, both payroll compensation and noncompensation. We said we'd get about $600 million in payroll and $400 million in non-comp. With the actions that we took at the beginning of the year and the actions that we're taking in a more targeted way now, we will, generally speaking, get to that $600 million number on payroll. And we can see a line of sight to actually surpassing that number between now and year-end. So we're running the firm tighter, and we're preparing for a tougher environment. We'd love to be surprised on the upside, We might be surprised on the upside. We can always flex into that. But we definitely have a much more cautious tone.

Yes. Okay. So to your point, it sounds very cautious tone in the near term. I guess help the audience understand maybe the longer term and how you think about Goldman's strategic positioning over time. And are there any competitive advantages that the environment brings up for Goldman?

Sure. So many of you know Goldman Sachs well, we're 154 years old. We've been at this for a very long time. I think there's some fundamental foundational elements of the firm that have been comparative advantages for a long time that remain comparative advantages. First and foremost, we're highly focused on people and culture. Sounds like a simple thing, but we still think it's a really value-added competitive advantage for our firm. We hire great people. We train them well, we mentor them, we develop them. We give them long-term crew opportunities. They go on to build big businesses, run big businesses and really grow and expand the firm. And our capabilities continue to get stronger as we have more and more great talent in the firm. And we work very hard on our culture to get that collaborative, team-oriented approach, which gets the best out of that broad-based talent. That has given us a long-established position as a trusted adviser to our clients, whether they're corporations, institutions, wealthy families. We've built a quite sizable established position as a trusted adviser. And those 2 words we use pretty purposefully in terms of those established positions and serving our clients. We are an excellent risk manager, which in great markets, seems a little less relevant; in tougher markets, seems a heck of a lot more relevant. We risk-manage well for ourselves and our own balance sheet, and we also risk manage well for our clients. And we think that we're excellent at that. We're not perfect. We certainly can make mistakes, but that's a core strength of the firm, which I think will become more and more apparent as you get into more challenging markets. And we are incredibly focused on execution excellence. I often hear from people, there's more commoditization in your business. It's easier just to execute transactions. There are certainly elements of our business where that's the case. But we still believe intellectual capital, the ability to execute on an excellent basis for your clients is a competitive advantage, and not everybody is as good at it as we think we are. There are others that are equally good probably, but that's something that we think is a core strength of the firm. And so those are foundational. And then I would say more recently, we've worked very hard on something we call One Goldman Sachs. What you said, I mean, what's the thing that's a little bit more different in the last 4 or 5 years, that would be more of a comparative advantage, I would say One Goldman Sachs. One Goldman Sachs is really about clients at the center of everything we do. And breaking down the silos in the firm, which should not be obvious to the clients, so we can deliver the whole value proposition of the firm to our clients. It sounds like a very simple thing to do. Most large-scale banks are not particularly good at doing it because you get very large, you get very balkanized. You have lots of different businesses, products, different areas of the firm. It's hard to deliver the whole firm. And I think we've done in the last 4 or 5 years, an exceptional job of finding a way to be much more holistic in the way we deliver our firm in a One Goldman Sachs construct. We have 2 large businesses at scale that are the primary businesses of the firm, Global Banking & Markets and Asset & Wealth Management. Global Banking & Markets is a $30-plus billion revenue business. It's a business that is taking market share, which in a $30-plus billion revenue business is often hard to do. It's a business that does consume a lot of capital, but we've become much more efficient in the way we operate in that business. And so we're generating mid-teens returns at scale with, I would say, GDP plus growth characteristics. And so that business is a primary business that with One Goldman Sachs behavior, we've really figured out where to take more share of wallet in the context of that broad marketplace. And then Asset & Wealth Management, which is also a scale business, which we've been at 30-plus years, but is going through more of a business transformation, where we're shifting from more balance sheet intense investing to more third-party funds investing, which gives us the ability to generate more of a management fee stream. It also gives us ability to marshal more resource and more capital to invest because our balance sheet is not infinite. And that's a business where we're top 5 in active Asset Management and top 5 in alternatives Asset Management, with a large-scale, ultrahigh worth wealth manager that's probably the best of its kind in its market segment. And that's a pretty unique integrated platform that we are going through a big transformation to get that business also to mid-teens. So you could have 2 primary businesses in the firm that really represent the firm, both at mid-teens over a reasonable period of time, operating in a One Goldman Sachs way that we think is comparatively different than the way our peer firms operate.

Let's dig into some of your businesses. Maybe start with Advisory. As you know, I am -- we've been generally a fan of the investment bank and incredible profitability there. How do you think about the market share gains in that business that you've enjoyed? What has driven that? And how do you think about it going forward?

So I appreciate you asking me about our Advisory business because we're really proud of, we call it, the merger business. That's the longer-dated terminology we would tend to use, but it is an Advisory business. We have a lot of humility about our position in this business because you don't take anything for granted. We serve our clients globally around the world with strategic advice. We have become much better at attaching the other components of our capabilities, risk management, financing, to that strategic advice. So that when we're doing a transaction for a corporate client, if they're buying an asset, we can be their strategic adviser, we can also finance and risk manage. As they're making, let's say, a cash acquisition, they might want to do hedging, they need a bridge loan. We're much better now at bringing a much more integrated package and doing that on a very confidential basis with top quality strategic advice, balance sheet risk management capabilities. But this business at the core, which has been #1 for 20 years in a row, hard to do in our industry. Our industry is intensely competitive, is really about people, trust and long-dated relationships. And it's back to what I said in your earlier question, we have extremely strong talent in this business, and they've been at it a very long time. We have met bankers in that business that are 30-plus year veterans, still loving the business, still wanting to serve their clients, still getting on airplanes in the morning to go give clients advice, answer their questions, try to help them sort through this complicated world. And it's a very global, broad and deep business. We certainly do a lot of big deals with bigger companies. We've increasingly broadened our footprint. We do more transactions with private equity portfolio companies, middle market companies, family businesses. And so the business has really broadened its aperture, which is how we've maintained that #1 position over time. And we're really good at what we do. So our clients trust us. They want to hire us. They want to pay us fairly for what we do. We have a -- I think over the last 10 years, we've enjoyed between $500 million and $1.5 billion revenue premium to our nearest competitor, which is a pretty healthy revenue premium in a business, as I said, that's highly competitive, which I think is reflective of the fact that we're delivering real value. If that was just 1 year, you could say, well, it's 1 year, you worked on certain transactions. But this is something that's persisted now over 10 years, and we've been #1 over -- for roughly 20 years. So there's something working in the secret sauce of what we do in terms of building long-term relationships and serving our clients and delivering value.

How do you think about the M&A cycle then? Where do you think we are in the M&A cycle? Obviously, a lot of antitrust issues that have come up. But curious, given you're the #1 player, what you think.

So it's definitely a more challenging environment and volumes are down accordingly. We went through this period with very low interest rates and very strong equity markets, where there was a lot of transaction volume. It was very easy to do transactions. Shareholders are very supportive of transactions. Most things penciled to being accretive, the cost of financing was very cheap and there was a lot of transformation going on in the world from a technology standpoint. So it was a really extraordinary period of time in the M&A environment -- M&A marketplace for, let's say, the last 5-plus years. The other thing that happened during that period of time is private equity became a much more prominent player in the markets. They own more companies, they transact in more companies. There's much more M&A happening out of the private equity community. And so I think roughly 1/3 of the M&A volume would have come from private equity firms in the last handful of years. And obviously, given the markets we're in today, that volume is more challenged. It's much harder to do LBOs today with the cost of financing and the availability of financing than it was certainly in the more go-go period. So you've got more muted activity with private equity firms, you've got less activity at the larger-scale companies because, as you said, the antitrust regime is more complicated. I think there's less appetite for larger scale companies to do larger-sized deals and take the antitrust risk, so it's definitely a more muted level of activity there. There's still pretty healthy activity in the middle. I think that there will be a lot of activity in that kind of $1 billion to $10 billion range, if you were to pick a size. Corporates still want to do transactions. There are interesting things to do. They're very well financed. They're very well -- their balance sheets are strong. So there's plenty to do there. And we're seeing a fair bit of activity there. There will be activity around the portfolio companies or private equity firms because they have to be transacted upon. They have to deliver returns and return capital to their LPs. So we're still pretty bullish about the long-term opportunities. So I think we're going through a little bit of a reset. We need the cost of financing and equity prices to find some equilibrium, where you can actually transact on more companies. So I'd say it's a bit of a reset. It's still a very strong marketplace. We -- I'd say more activism. Probably more spins, more deconsolidation, a bit more fit and focus. So there's plenty of themes that you could point to that are going to propel M&A activity, but we're still going to a little bit of a reset in terms of overall volumes.

Okay. Let's switch to your markets business. Obviously, the vast majority of the capital firm and probably the one place where I think investors are always worried about, sustainability. To be fair, the management team has done a pretty good job on improving returns and taking market share. Let's start with the return profile of that business. Just talk about where you've got to, what's driven the improvement in returns and then we can maybe move to market share.

Okay, sure. So Global Banking & Markets is really kind of 3 big component pieces. There's an investment banking set of activities. We talked about M&A, and there's all the capital markets activity, there's a lot of structured finance activity in there. And then there's Equities and Fixed Income, which are really the combination of risk intermediation activities and financing activities. And so those broad component pieces comprise this $30-plus billion business that I referred to. We were operating in those Equities, that Equity and Fixed Income part of the business, we were operating with returns that were sub-10% for a period of time. Lots of capital. Markets were kind of sideways. And our shares were low relative to what Goldman Sachs should aspire to have. And so we really embarked upon a 3-point plan. We -- so we can improve our shares. The second thing we think we can do is we can do more financing, because we were very heavy risk intermediation, which in our parlance would be like trading. A company -- an institution wants you to take a block of securities and redistribute them in the market, we facilitate that. That's sort of a trading operation. We did more -- much more of that than we would finance our clients. And so we were unbalanced in that context. And the third thing that we said we needed to do is we needed to become more efficient, mostly on operating expenses, a little bit on capital, but mostly on operating expenses. And so we tackled each of those 3 things with, I'd say, quite prescriptive plan. We had an Investor Day in 2020 where we laid that out very clearly. And between 2020 and today, we've gained about 370 basis points of share between banking, Equities and Fixed Income, so in totality. Much of that has come from Equities and Fixed Income because we were coming from a lower base, but we actually have improved our share in banking, partially by virtue of increasing our footprint, covering more companies and by doing a better job in terms of really covering those companies better with more holistic capabilities. So the share gains are significant. We think there's more to get. We've got a lot of work to do to continue to drive share. But we've -- 370 basis points of share in a business that's $30-plus billion, is a lot of share. The second thing that we did, and some of this is where that share gain came from, is we focused a lot on financing. So if you think about -- take our prime business, which is financing equity clients that are transacting in Equities, much of it from hedge funds, not all of it. We have a very nice business there and have had for a long time, but our shares were sub where they should be. We had let them drift a little bit. And so we've really invested a lot of resource, some of which is technology, to become a better provider of electronic execution, fast, clean, simple, straight-through processing, where we had, frankly, underinvested for some time, and we've really taken ourselves to a whole different level. And some of it is investment in those relationships and the more holistic service of those clients, where they might pay you in prime for things that you do in other parts of the relationship, but a lot of the economic gain would come through, through the prime relationship. So we made a lot of progress, and that would be an example. We've done a lot more financing in our Fixed Income footprint with clients and mortgages, credit, commodities, et cetera. So we've really driven finance. I think we've grown our financing revenues $3 billion over the last 3 years, which was like a 16% compound annual growth rate in financing our clients. And we think there's plenty more to get. And we're in a more complicated environment for financing today, where our capability should be very well suited to providing capital and financing when other people seem to be drifting a little bit out of the market because it's getting a little more challenging. And the third thing is really operating efficiency. We said at the initial Investor Day in 2020 that we would find $1.3 billion of operating efficiencies in the firm and redeploy some of those operating efficiencies back into investing in other parts of the firm to drive growth. $800 million or so of those operating efficiencies came out of Global Banking & Markets. We made ourselves more efficient. We put more technology in. We automated more. We destacked and depyramided the construct a little bit. We took some headcount out. And we found that we could better serve our clients with actually fewer people, more technology and a better mindset of a client orientation that was focused on One Goldman Sachs. And so those 3 component pieces really ended up driving a business that has much higher share. That business in 2022 had a 16% ROE. So higher share, higher ROEs, more financing. We think it can idle now at a much higher rate than an idle before. So it should idle in the teens. We might not do 16% returns in a market where activity is more muted, but it should do mid-teens returns through the cycle. It can sometimes do better, it might do a little bit worse in lower parts of the cycle, but it should be a teens returning business now sustainably. So we've lifted the floor. We've made it, we think, more understandable and more predictable. It's never going to be perfectly predictable. And we're running a very large-scale, client-oriented franchise that we think has a lot more running room to take more share and continue to grow.

Can you talk more about the financing opportunity? What's happened so far? Is it just the market share take from other banks? Are you expanding the pie? Are there new openings that you're bringing to the table? And how do you think about the other set of finance and the risks involved, et cetera?

I would say that there is growth in the financing wallet. And I would point most prominently to alternative asset managers. So if you think about the likes of Blackstone, KKR, Apollo, et cetera, Ares, the larger-scale guys and even the more middle-middle size guys, they're building credit businesses, they're building real estate businesses. They're building other businesses than the sort of traditional private equity platforms. And they're growing their assets at a CAGR of 6%, 7%, 8%, 10%. In the prior handful of years, it was probably teens. Those assets all have to be financed. Some of them get financed in LBO form, as an LBO at 60% loan to value. Some of them get financed as back leverage on a set of portfolio investments. Some of them will get financed as a portfolio of collateralized assets. They all get to finance a different attachment points, but they have to be financed. And that's a lot of growth in overall financing wallet, where Goldman Sachs is particularly well suited. We know that client base well. We know those assets well. We understand how to finance those assets. We've been doing that in a very long time. So that to me would be growth in wallet. We might be taking some share a little bit here and there. But I think a lot of that is just secular growth in financing. And then I think in more traditional forms of collateralized lending, we've become more focused on wanting to finance those assets as opposed to just looking to trade in those assets. And so there, we probably are taking a bit of share from maybe some of the European banks or others who were pulling a little bit back. I don't think it's any one person where we're taking share, I think it's probably pretty distributed. And I think, honestly, in the next 18 to 24 months, there's an opportunity for us to take more share, we have to execute. But the environment for financing is going to get more constrained. Fewer people are going to be willing to expand their balance sheet or expand their RWA capacity in this environment. And so there's going to be -- there are going to be places for us to do more as long as we're smart and thoughtful. And one of the things about being a good risk manager is we're pretty focused on risk, we're focused on structure, we're focused on terms. We certainly care a lot about price. But we care equally about structure and terms, which, candidly, when you're when you're in a structured financing, price matters, but actually structure and terms, if it doesn't go, mattered more. And we're pretty adept at thinking about those things holistically.

And to pull back on peers on financing, do you think that deposits constrained, capital constrained? Why do you think peers pull?

I think that you're going to have -- look, a lot of the financing in the United States comes from regional banks. They probably will have less capacity for a period of time. And I think other financing providers in tougher environments, tougher markets, where the economy is less good, and they're a little bit less confident, will tend to pull back. That's natural behavior. So one of my personal thesis about what's going to happen is I think it's going to be a more constrained environment broadly for people to raise capital. It has been great for a long period of time, it's going to get tougher. It doesn't mean you can't raise capital. It just means your options, your availability, are going to be a little bit more constrained. The cost is going to be higher. And the terms of trade are going to be a little tougher. There might be covenants. There might be more things that we used to have that kind of got rid of because we went for a very long time with low rates and plentiful available 'liquidity.

Okay. On the share gains, I think history suggests Goldman is very good over time at gaining share. But if I look back post the financial crisis, a ton of share gains kind of went away post the financial crisis, get a bit of share again this time. What gives you confidence around sustainability of that share gain? Because from what I hear from you, it's actually I think you can accelerate from here. So what gives you that level of confidence in the long-term sustainability?

Well, I think we've done the easy part. So I'm not sitting here projecting we're going to do -- from 370 basis points, we're going to do another 370 easily, but there is more to get. And what gives me confidence is if you just -- the way we look at it, we do very granular bottoms -- I'm giving you top-down numbers, but we do a very granular bottoms-up analysis. We started about 4 years ago, looking at the top 100 institutional clients. And we looked at the top 100 in terms of size of wallet and complexity, meaning that they would touch you in many different parts of the firm. And we analyzed our share with those top 100. The metric that we use is how many of them are we top 3 share of wallet with. When we started, I think at the end of '19, we were top 3 with 51 of the top 100. I was a little surprised actually when we did that work, that it wasn't better than that. And we set about a path to make it better than that. We are now top 3 with 79 of those top 100. So you would say, okay, well, you've done a lot, there's not much more to get. What we're now embarking upon is we're saying, okay, we're not top 1 or 2 with as many of those as we want to be. I'm not going to give you that number because we haven't disclosed that number, but we probably will at some point. We're not top 1 or 2 in many, many places where we should be top 1 or 2. We don't have to be one everywhere, and sometimes being one is lower return activity if you're extending lower-value balance sheet. But for Goldman Sachs, not to be top 1 or 2 with a bunch of these clients that you would know well, you would say there's no real good reason for that. And so we are going to continue to push to do that. And the second thing we're doing is we're looking at the next 50 clients. where, we knew this going into the top 100, we just thought we wouldn't try to bite off more than we could chew. The next 50 clients also present a size and scale opportunity for us where, again, our shares are suboptimal. And so those 2 pieces will give us plenty to chew on for the next few years to, I think, continue to gain share. And then if you amplify the financing opportunity on top of that, which will be synergistic to gain share, we think there's going to be a lot to do. And we think our skill set will be particularly valuable in this period of time where we can be more important as a financier, as an adviser, and we can be more holistic in the way we cover those clients.

Okay. But let's move to the near term here. Markets businesses or the Global Markets business, how are you thinking about sort of the near-term environment?

So I'm very bullish on the intermediate to long term. The near term is more challenging. All that I said in the macro question that you asked, I think bears on this business. I mean if you think about Global Banking & Markets, the capital markets activity is more sluggish. We have seen some signs of strength in Equities. We've had a couple of good weeks of equity capital markets activity. So you could envision that we might have a better back half of the year. We're not necessarily planning for, that certainly could happen. But in the markets-oriented businesses, Equities and Fixed Income, the activity levels are more muted. And so if I think back to the second quarter of last year, we had a particularly strong quarter. It was more driven by macro factors. If you think back to a year ago, there was a lot going on in commodities, there was a lot going on in rates and there was a fair bit going out in emerging markets. And we did a very good job helping our clients through a pretty topsy-turvy environment at that point in time where there was a lot to do. There was a lot of fall in marketplace. So we had a particularly strong course. We have a tougher comp this quarter. It's more muted. And so if I think about we're tracking right now down a little over 25% from that tougher comp in Equities and Fixed Income. But I would say from a client standpoint, I've seen a lot of clients in the last few months, I feel like our positioning with our clients is very strong. Our clients are kind of sitting a bit more in their hands right now. That will change. So this is a quarter where I think it's just going to be softer. It will be softer for us like it is for others. We come off a much tougher comp with a much stronger outperformance in the prior year period. But I feel very strong about the franchise, and I think this is just a moment in time.

Okay. Let's switch over to the other big business you have, Asset & Wealth Management. It's certainly one that the management team has put a ton of emphasis on. Can you just walk through that business, what it looks like today? Where you think there's differentiation relative to the competitive set and maybe how you're thinking about growth opportunities?

Sure. So I said a little bit this at the outset, but the Asset & Wealth Management business at Goldman Sachs is a $2.7 trillion liquid public markets assets under supervision platform. All active asset management, no passive. Full suite of capabilities from cash and money markets all the way through to fundamental equity and everything in the middle. And a top -- and that's a top 5 business in terms of scale. And a top 5 alternative asset manager, with roughly $450 billion of assets in the alternatives category. So we're relatively unique in having scale in liquid active and alternatives. Most people have a lot of scale in one or the other. We have scale in both. And then we have a Wealth Management business that is a highly scaled Wealth Management platform focused on the ultra-high net worth category of clients, which are the wealthiest people in the world both in the Americas and outside the Americas. And all that into one integrated platform, which we think is a pretty unique scaled platform that touches institutional clients and very wealthy clients with a lot of capability in a global broad and deep kind of construct where we have the ability to operate across asset classes all over the world and really serve our clients holistically, which I think is hard to do for many people. You have to build a lot of scale, have a lot of footprints, a lot of experience, be a proven risk manager. It's not so easy to replicate that. We also have an Investment Banking platform, as we've talked about, that has relationships all over the world that is an incredible sourcing engine for transaction opportunities. That tends to serve more of the alternative asset side of the Asset Management platform. It also serves the Wealth Management side of the platform. There's a lot of synergy between our Investment Banking business and our Wealth Management clientele, going both ways. But that sourcing engine, we think, is a real significant advantage in terms of finding transactions, generating alpha in funds that we're raising and really delivering differentiated sourcing, so you can invest money more intelligently and deliver better returns over time. The risk management capability that we have in the firm, we think, is also an important element that runs across the firm. It doesn't just sit in Asset & Wealth Management. It doesn't just sit in Global Banking & Markets. We spend a lot of time cross-pollinating that risk management capability. And so we think that's all -- we're not the only firm in the world that has risk management capability, but we think that we have a lot of it and we're very good at transferring it across these business lines. So that certainly benefits the Asset & Wealth Management platform. And we have very global relationships. So I'm sure you're going to ask me about transition we're making in the business at some point. The transition from a more balance sheet intensive business to a more third-party funds business means you have to raise a lot of third-party funds to steward that capital for your clients. We serve those clients in many, many ways already. So we start from a running head start of having relationships with large pension funds, large sovereign wealth funds, large corporate pensions, insurance companies, et cetera. So we've got very long-dated relationships where we're already serving them in multiple ways, that we can now find another way to help them steward capital. So we think we've got some pretty unique attributes. Scale is going to matter a lot. The ability to navigate through challenging market is going to matter a lot, and we like the position we're in.

Okay. Let's talk about your point around transition from a balance sheet intense business to a much more capital-light fee business. A lot of that depends on the ability to sell down assets, et cetera. It's been a more challenging environment for those sorts of disposition. So level of confidence and your ability to still hit your targets.

Sure. So just to put it in context, we have -- we use the term historical principal investments, which would be the direct investments on our balance sheet that would be an -- mostly an alternative asset form that we would have invested as a merchant bank and put those on our balance sheet, instead of putting them in third-party funds. We had $64 billion of historical principal investments in 2019. We, at the end of the first quarter of this year, had $27 billion. So we've taken near $40 billion of reduction in our balance sheet over the course of the last, let's say, 3 and change years. That's a pretty significant reduction. And we are stating that we will be below $15 billion by the end of 2024, with an intermediate term goal to get down to 0. And so the plan is for that $64 billion to go down to 0. And then we will end up with something plus/minus $20 billion of co-investment in our funds. So if you think about that as you have a fund, you're the general partner of the fund, your general partner commit to the fund is X. That's a co-investment in the fund alongside your LPs. So the idea would be every dollar we have invested is a co-invest into a fund alongside our clients. There's no other investment that we have other than what's completely co-invested with our clients. So that's perfect alignment, where we're eating our own cooking. So if we're telling an LP, you should invest in this credit fund or this equity fund or this infrastructure fund, we have our own money up completely alongside you, heads up as full alignment. That's the strategy. It's a tougher environment to sell assets today for sure than it was in 2021 or the beginning of 2022. As I said, we sold close to $40 billion of assets in the better environment. We have actually sold quite a bit of assets this year. We have good assets. So fortunately, people would like to own a bunch of the assets that we have on our balance sheet. The prices obviously will vary depending upon the market environment. We have a bottoms-up plan -- just like in market share, I'm giving you top-down numbers. We have a bottoms-up plan asset by asset, portfolio by portfolio. We're in the market with a number of assets right now. I'm actually pleasantly surprised by the quality of the bids we're receiving. They're not at the same prices we would have received in 2021. But because they're good assets, there is demand for these assets. And our focus is on selling these assets off the balance sheet. We want to get fair prices, we expect to get fair prices, but we're going to execute, and we have every confidence based on our bottoms-up analysis that we can do that.

The other side of that sort of strategy is fund raising. So what's the environment like for fund raising on the alternative side?

So we've raised -- well, I should say, we stated at our initial Investor Day in 2020 that we would raise $150 billion of third-party funds by 2024. We then upped that target to $225 billion. So we went from $150 billion to $225 billion. And we've raised a little over $190 billion. So we're well on our way to our $225 billion target. So we've done really, really well. One of the things that I think is interesting about our platform is we have a very broad suite of offerings, and we're pretty nimble in the context of what we go to market with and when we go to market with those offerings. An example would be in 2020, leading up to the pandemic, before the pandemic, we thought we'd be in the market with a private equity fund, and we were gearing up to do that. The pandemic happened, and we quite quickly shifted and realized the opportunity set and the thing that our client most demand at that point in time was more hybrid capital. We thought there would be an extraordinary opportunity to invest hybrid capital because we thought that with the demand destruction in the world, companies would have a very hard time financing. It turned out that the central banks made that easier. So the opportunity set didn't emerge quite as extraordinary as we thought, but it was still pretty good, and we still have quite a lot of that fund left to invest. And so that was an example of pivoting into something that was more in demand at that moment in time that was more something our clients really wanted and needed. And we've done really well finding ways to do that. And so that's -- that $190-some billion of fundraising, there's a lot of fundraising in the context of the world. It's definitely a harder environment today than it was, but I would say it's harder in equity-type product. One of the things that makes me feel good about our forward trajectory is one of the power alleys of our firm is credit. We're good in Fixed Income. We're good in credit. We have a lot of strength in D&A in that arena. This is going to be a good environment for private credit investing, and that should near to the benefit of Goldman Sachs and other people, too, but that will be one of the larger and more scaled players in that arena. We also have very strong and active historical presence in secondaries, private equity secondaries mostly. So while it's harder to invest in private equity today or harder to raise money private equity today, there's actually quite a lot of demand for secondary product because a lot of the LPs need to create liquidity, as I said earlier, and want to sell portfolios to create that liquidity. So that secondary product can go in and buy those portfolios. That's an area where we're a leader, and we're raising quite a lot of money. There'll be distressed real estate opportunities that we'll avail ourselves up. So there's a lot we think we can do in this environment. It will be probably less equity -- primary equity centric and probably more credit, real estate, infrastructure, secondary equity. But that fortunately is an area -- those are areas where we're strong, I think, we should benefit from. So we've got plenty of conviction on our forward fundraising opportunities. I think the growth rate of fundraising in the world will be slower. I think those larger-scaled platforms will do better. I think the scale, brand trust long-term stewards of capital, pretty safe places to put your capital, will do better, and we're certainly one of those. So we feel like we are well positioned for this environment.

Let's switch to the Wealth business, another premium sort of brand that you have, particularly in the ultra-high net worth space. But it's an area where there's significant competition, all of your peers are trying to invest in there. And arguably, the scale of Goldman is somewhat smaller relative to some of the bigger players. So how do you think about that business really scaling up over time and the opportunity set for the business?

So just to give you a sense for the size and scale of our business, it's -- as I said, it's focused primarily on ultra-high net worth clients, so the wealthiest people in the world and families in the world. We have about $1 trillion of client assets on that platform. So it's a quite scaled platform. We have about 1,000 advisers. The average tenure of those advisers would be roughly 15 years. This business and this platform actually reminds me a lot of our merger business. You asked me earlier about our Advisory business, this has a lot of the same characteristics, long-tenured professionals, trusted relationships, scale, ability to work with clients over time, provide solutions, not transactional, but trust and Advisory and advice over time, and the opportunities come on the back of that advice, not based on a transactional approach. I think we have about an 8% share of the Americas. So it's a highly fragmented market. That's ultra-high net worth. That's not high net worth, but ultra-high net worth. So it's still quite fragmented. We've taken a fair bit of share. I think our share when we -- when I stepped into this job, our share would have been closer to 6%. It's now like 8%, and I think it's got plenty of running room. We think this is a business that can grow mid- to high single digits for a pretty long time. The growth opportunities for us relate to hiring more advisers. What we found is when we put more advisers on the field and more people around those advisers, we call them content specialists that are able to support those advisers and provide more solutions clients, we get very good returns on that investment. Those returns happen over time. The advisers have to become self-sustaining, and you have to make a longer-term investment, but the returns are pretty predictably strong. And so we -- at moments in our history of underinvested and maybe invested a little bit more but not quite enough, I think trying to be very persistent about our investment now and continuing to really invest properly. And so I think hiring advisers is a clear opportunity for us. There's real opportunity internationally. There's definitely -- I mean, the European markets are a little more complicated with some of what's occurred. We're seeing some opportunity coming out of that, and we will continue to see opportunity coming out of that. By the way, similarly in the United States, given some of the unrest. And so we think the marketplace and the dynamic is shifting a little bit, and we're going to benefit from some of those opportunities, and we're going to have to continue to invest both in the U.S. and internationally. And then the third area that we see as a real growth opportunity is in private banking and lending, which is a business and an activity we've been doing for quite a long time, and we've built a nice sizable platform in lending to our Private Wealth clients. But we can do more. And I'd link that opportunity back to some of the things we've done in banking and markets historically, where we had nice businesses, nice share, but we didn't lean in as heavily. And I think in Private Wealth, we can do the same sort of thing where we can really lean in more heavily. We've just moved one of our young, talented next-generation leaders to run that business in that platform. And we're doing a lot to really support her in that effort. And so I think that will be another growth opportunity for us in Wealth.

Great. Your money fund business, I just wonder has not talked about a lot, but clearly been a beneficiary of the bank in stress and deposit outflows. Maybe talk about how you're thinking about that business and where you see opportunities for further growth.

Yes. So as I said, our liquid active asset management platform, the $2.7 trillion that I talked about, has a full suite of capabilities. It goes from cash and money markets all the way through. The cash and money markets business is about $760 billion of assets. So it is a big scale business. I think we're a top 3 player in terms of share. And so we've been at that a very long time. We've built a quite sizable platform, and we're very, very good in executing in that marketplace. And obviously, given the money in motion that's occurred on the back of, let's say, the March-plus period with the regional bank unrest, we've seen a lot more flow into money markets, and Goldman Sachs has been a real beneficiary of that given our strong presence and our share. And we've been on the front foot in the context of running that business. So we really like that business a lot. There have been moments in time where it's more and less attractive depending on how people feel about cash and how they feel about the strength of their cash and the trust that they have on where their cash is parked. In the 0 rate environment, we were giving fee waivers in that business. So it was a little less -- it was attractive and less attractive. In a real rate environment, that business is going to be very attractive. And we think it's going to be attractive for some time to come. It carries very nice margins. We've got a very scaled position, and we see real benefits coming from the flow. So I'm -- we're quite bullish on it.

On that business, is there a broader strategic benefit tool in the business? Does it help your Wealth Management business in any way, maybe as a client acquisition tool?

It does. It does. It's -- I think about a lot of that flow comes from corporates. So when we work on transactions with corporates, they often want to put the cash somewhere. And so there's a lot of flow that comes from our corporate franchise. It certainly benefits the Wealth Management franchise. So it's synergistic the Wealth Management franchise. So the way I think about it simplistically is cash, deposits, money markets, that whole asset class, Goldman Sachs is an important asset class, and we want to become a leader, when frankly, we already are, but we're going to continually be a stronger player in that broad-based asset class, and there is synergy between the different component parts of the firm to focus there. So I do think it's going to be a long-term strategic asset for the firm.

Okay. And then let's lastly talk about the platform businesses and the Consumer business, obviously, one where the management team has deemphasized recently. But just talk about some of the changes you've made there and sort of the progress so far.

Sure. So we, in the fall of last year were pretty clear that we were narrowing our ambitions in our Consumer businesses. And from that statement forward, we've begun executing on that. It will be most prominently felt to you all by virtue of what we've done in terms of selling our Marcus loan portfolio, where we've started the process of selling that portfolio. We sold the first tranche, and we are in the market selling more. And so that Marcus loan portfolio will be completely sold and will be out of the Marcus lending platform business over a reasonable period of time. And then the second major element would be GreenSky. So we -- GreenSky's business that we bought, that we have announced that we're exploring a sale. We are, in fact, running a process now in terms of selling GreenSky. And so those 2 component pieces are the clear manifestation of our Consumer ambitions. With respect -- and I'd say because we are now executing upon that narrowing of the ambitions, there will be some noise in our P&L as we work through the execution of these component pieces. With respect to GreenSky, I would say there are kind of 3 component pieces that are worth talking about or thinking about. One is with respect to goodwill. So we have been pretty clear in our financial statements that we have been evaluating and monitoring the goodwill in that business. We have about $500 million of goodwill in Consumer platforms, which is a business unit in Platform Solutions. And as the marketplace has gotten a little weaker, we've been monitoring whether that goodwill should be impaired over some period of time. And as we embark upon the sale process, that will be another element for us to consider. And so we're evaluating the impairment likelihood on that goodwill. The second piece would be intangibles. There's intangibles in that business. And so again, as the sale process unfolds, we'll be evaluating those intangibles. And the third piece, much like in the Marcus loan construct, we have a loan book in GreenSky. And by the way, GreenSky is a really good business, which we think is actually doing very well. It's just, at this point, not strategic for Goldman Sachs. But the loan book in that business, much like the Marcus loan book, could be sold separately from the platform. We may not sell it separately, but it certainly could be sold separately. If we elect to sell it separately, we might then look to change the accounting methodology to held-for-sale accounting. Were we to do that, you would then look at what the sale price would be on a held-for-sale basis. which is what happened in the Marcus loan sale. It was immaterial to the Marcus loan sale in the context of the P&L, and we would expect GreenSky to be similarly immaterial. But that's not an election that we decided to make at this point.

Okay. And then any updates on the Apple partnership and how you're thinking about that strategically.

We feel good about the Apple partnership. It's a very strong relationship. Apple is an important client of the firm. They're important partner to the firm. That is an extraordinarily powerful ecosystem. I mean it just continues to amaze me when you think about what that ecosystem can deliver. And so we're privileged to be a partner with them and to be able to be valuable to them, we think, in the context of providing services, banking services to their customers. So we feel good about it. It's going well. And we're continuing to invest in the partnership and the relationship. And we're trying to do our part to be an ever-better partner to run the credit card business as well as we can. We think we can make it more efficient and more profitable over time, and we're working hard at that.

Okay. Well, let's put it all together. And the question I always get from investors is like why invest in Goldman? Can you really have a rerate given the business mix? So I'll turn it out to you. What's your pitch there?

I should be asking you that question. But since you're asking me, I'll take a stab at it. I think our story is actually relatively simple. We have to execute. But to me, the Asset & Wealth Management transition, the business transformation that's going on in there, is a significant value unlock opportunity for the firm. We've gone from a balance sheet-intensive investing business that produced very nice returns and very nice profits, but in a very variable way, to a third-party funds business that over time will be $10-plus billion -- we will be a $10-plus billion of management fees very shortly. We can continue to grow that, we think at a high single-digit rate for a fairly long time if we execute on some of the things you and I talked about, which we expect to be able to do. And so management fees in the firm will continue to be a bigger share of the firm, a bigger share of revenues, a bigger share of profits, and it will be a much more sustainable, durable, resilient business that doesn't have variability that you all can predict on a much more systematic basis. Not perfectly predict, but certainly much more predict. And so that transition, we think, is really important. That's a big value unlock for the firm. And at the same time, we have to continue to prove that we have mid-teens returns in the Global Banking & Markets business. So if we have mid-teens returns in the Global Banking & Markets business and we have mid-teens returns in Asset & Wealth Management, with sustainably growing management fees, we should get rerated. I'm not smart enough to know when that's going to happen and how the market is going to view that. But to me, at book value, our stock seems very, very, very well priced, and there's a lot of opportunity if we can unlock in Asset & Wealth Management, which we expect to do.

Fantastic. With that, we're out of time. So thank you very much, John.

Thanks for your time. Thank you.

Thank you.