The Goldman Sachs Group, Inc. ($GS)

All right. I think we'll get started here. So good morning, everyone, and welcome to this session with Goldman Sachs. I'm very pleased to have once again at the conference, John Waldron, Goldman Sachs' President and Chief Operating Officer. Welcome, John. I think this is your eighth time here. So we really appreciate the effort to make it down to the conference.

Maybe, John, a good place to start is the company's strategy. Obviously, the stock has done very, very well, a function of both the operating environment, but really good multiyear execution [ on ] your strategy that has improved both the resiliency and durability of the return profile of Goldman Sachs. For those newer to the story, can you just talk through the key tenets of your strategy?

Okay. First of all, thank you for having me back. I love coming here. I love the conversation with you. Congratulations on another great conference. I would say our strategic priorities really remain unchanged. We've been pursuing this strategy for quite some time now, as you and I have been talking about. We aspire to be the most exceptional financial institution. We have 2 interconnected client franchises. We'll talk about those, I'm sure, a bit more today as we get into the question, Global Banking & Markets, Asset & Wealth Management. And as you referenced, we're trying to build more durable earnings power through the cycles. That's been our mantra, more durable earnings power through the cycles. We haven't really had a lot of cycles of late. We've had one positive cycle. Invariably, we'll have a cycle that's maybe a little bit less positive. Our job is to continue to be durable and continue to generate earnings power through whatever cycle the environment throws at us. We have a Global Banking & Markets business that is over $40 billion of revenue. It's the leading scale business in Banking & Markets. We've been #1 in the M&A business for 23 years in a row based on revenues. That's, by the way, hard to do in any business on Wall Street. It's a highly competitive market. So that shows you the power and durability of that franchise. We're the #1 equity player. We're a leading FICC franchise. And we're really -- if I look at the business across the piece, we're top 3 in essentially all the major verticals that you would care about in a banking and markets franchise. So we've got breadth, scale. That business is growing nicely. It's a phenomenal franchise. We'll talk some more about it. And then we have an Asset & Wealth Management business that is about $17 billion or so of revenue. That is $3.7 trillion of assets under supervision. It's a top 5 active asset manager. It's got a very sizable and scalable alternatives -- private markets alternative asset platform and a premier ultra-high net worth wealth franchise. So it's -- it covers the gamut of those 3 aspects, and is also a phenomenal business, I'm sure we'll talk [ some ] more about. We have, I'd say, a 3-pronged execution strategy -- execution of our strategy. First is to harness what we call One Goldman Sachs, which we started talking about 8 years ago here to serve our clients with excellence, which is really focusing on driving our wallet shares with our clients. We give clients better value proposition, we get better share of wallet. Pretty simple concept, but there's a lot of execution behind that. Second major element is to run world-class differentiated businesses and demonstrate the synergy between them. We're increasingly focused on proving to our clients that having these businesses together are -- is better for them. We deliver more value, and therefore, that's better for us in that order. And the third, which is going to -- which obviously garners a lot more focus and attention now in the age of AI is to invest to operate at scale, which is really about automation, efficiencies, productivity, scalability, resiliency. We see significant opportunity here, obviously, in the age of AI. I'm sure we'll talk some more about that. We made a lot of progress in the context of that execution and feel exceptionally good about our positioning in the world today. And we obviously, as I'm sure we'll get into, have some cyclical and secular tailwinds that are helping us in the execution of the strategy. So we have to be aware of that and clear about that. But we have a very differentiated franchise. We think we have phenomenal talent, and we work extremely hard on culture. You can have a lot of talent, but if you don't have a culture that binds that talent together, then you don't get as much out of it. And so we work very hard on that. We think that's a comparative advantage in our firm. And we have a lot of confidence in our ability to continue serving our clients with excellence and at the same time, delivering for our shareholders.

Let's drill into the culture and the client side. So One Goldman Sachs strategy that you talked about 8 years ago, which is attempt to have a more integrated, comprehensive approach to serving your biggest clients. Just talk through the evolution of that model over the last couple of years and how that's helped differentiate Goldman Sachs franchise.

Yes. I appreciate the question. I would characterize One Goldman Sachs now as the operating system of our firm. When we started 8 years ago, it was a concept of how we wanted to try to run the firm. Today, I would characterize it as the fundamental operating system of the firm. Critically important to our strategy and the execution of all the things we're trying to do. We started 2019 in a pilot where we essentially worked with about 30 clients to try to prove that we could cover them holistically. What does that mean in plain English? It means that we actually break down the silos in the firm, and we try to have one unified team, regardless of where you sit in the firm, regardless of what your P&L is, regardless of what your day-to-day incentives are, and we try to get you focused on covering the firm -- that client over the long term and doing what is right regardless of where the revenue shows up and regardless of what you think your day-to-day incentives are. There's a lot of work under the covers to do that. We started with that pilot. We've now expanded that to 100 clients, more than 100 clients across the firm. You need kind of global, multidimensional complex clients for that to really work. So that's off and running, and we've done very, very well there. A few years ago, we worked on what I'll call One Goldman Sachs 2.0, which is really focused on back to this question of synergy between the businesses. We have these 2 big businesses. We want to prove the theory that because we have those 2 big businesses that we are doing a better job, better value proposition to our clients, we can deliver more capability by virtue of having an Asset & Wealth Management capability alongside of Banking & Markets capability. We evidenced the gains here by seeing now a little less than 400 basis points of share gain in our Banking & Markets franchise over this period of time, which, again, is not easy to do. These are -- we've got tremendous competitors. Many of them have been here on the stage. They're all excellent in what they do. It's not so easy to gain that share. We've been able to do so. We are continuing on the path of gaining more share. We measure our top 3 relationships with the top clients in the world, meaning are we ranked in the top 3 with the most important largest scale multidimensional clients in the world. We started on that journey in 2019, where we were measured at 77 of the top 150. We're now at 127 of the top 150, where we're one of the top 3 providers of services to them, Banking & Markets. So that's a significant improvement in our position. We have more to go, but we've done very well. And now we're focused on can we generate more deal sourcing out of banking to help asset management. Can Wealth Management and Banking work together to better serve family offices, any number of things that connect the 2 franchises where we're delivering more value to our clients. We're very focused on that. And that kind of all is encapsulated in One Goldman Sachs 2.0. We'll talk about the Capital Solutions Group and the financing opportunity in the world. That's very much an evidence of One Goldman Sachs in action. And we become, we think, better risk managers by sharing risk management practices across the firm and not having those silos and actually being much more adept at thinking how assets are trading in various parts of the firm and across the markets. One Goldman Sachs 3.0 is our current iteration focused really back on the scalability and infrastructure and the firm and automation of the firm. So we've used our One Goldman Sachs capabilities and architecture to now drive our AI strategy. And that's really -- that includes optimizing our data strategy, that includes our migration to the cloud. That includes building tech-enabled solutions, AI-enabled solutions for clients, driving more productivity, driving scalability, giving better client solutions. And obviously, if we do all that effectively, we will have faster revenue growth, better margins, more shareholder value over time.

Okay. Let's talk about the macro backdrop. Every year, I ask you this question. I say it's dynamic. And once again, we're in a dynamic environment for the macro. What do you hear from clients?

Look, I think we're in a world of very strong nominal growth. People tend to talk in real growth for obvious reasons. But if you just look at the nominal growth in the economy, particularly in the United States, it's exceptionally strong. We've obviously got a business investment and capital spending cycle that is extraordinary. We were just talking before we went on stage, and how long will that last? We can all have our views, but it is an extraordinary cycle, and I think it has a fair bit of running room in front of it. You can see in the first quarter, S&P 500 earnings grew 26%. That's against a typical quarterly growth rate of 8% or 9%. So we're growing kind of 3x the typical rate. I would say the consumer is extraordinarily resilient. We're all sitting there here on pins and needles trying to figure out what's going to happen in the forward. But right now, I don't see any reason to believe the consumer isn't continuing to spend. And the labor market is actually quite resilient. With all the potential risks and concerns about labor, which I think are reasonable risk to be worried about, the labor market data is quite strong. And so I think you have a backdrop that is generally very, very good. There are plenty of risk elements that we all can sit here and enumerate and worry about, and we pay extremely close attention daily, hourly to these risk elements. Inflation, I would say, is probably the single biggest risk element. It's the one that worries me the most personally. It has impact on back-end rates. So if you get the long end of the rate curve around the world, which is obviously starting to trade differently than we've seen for most of the cycle we've been living in, you get those rates to start living in the higher zones that can have impact on cost of capital across the economy. Consumer behavior, as I referenced, I think we're all worried about it, but there's no reason to at this moment to see any real signs of concern. Geopolitics supply shocks, they're right in front of us. That could get worse. I'd say fiscal imbalances continues to be a major problem. I think that is alongside inflation, a major concern over time if that doesn't get fixed and dealt with. And then cyber, which doesn't -- I mean, I think it's getting more attention now with [ Mthos ] and so forth. But cyber, I think, is a deep tail risk in the marketplace that we need to be worried about. And so clients are all worried about these risks, too. Having said that, they are powering through because there's real underlying nominal growth opportunities, and they need to run their businesses. And I think clients have become accustomed to dealing with uncertainty. And so we see extraordinary client activity right now. Why is that? Obviously, the CapEx cycle. So this kind of generational business investment spend that's going on in the economy with AI at the core. It's not just AI, but AI is definitely at the core. That creates a lot of activity. I would say there's a real bias and need for scale. So we'll talk some more about that, but I think that drives a lot of activity. Clients all over the world, whether you're a corporate or institutional client or family office, you're thinking about how do I have scale in my environment. And then the absolute growth in the size and scale of the capital markets creates a lot of opportunity for firms like ours. So that combination is a very virtuous combination. We see huge drivers of capital, obviously, in AI and infra. We see huge drivers in data, digitization. We see huge drivers in energy and power. We see huge drivers in logistics, supply chains, physical infrastructure. There are plenty of drivers of activity. And our clients, I would observe, I've been doing this 30-some years. I don't think I've seen an environment where clients need our advice more and need our capital more than they do at this moment. And so that's a virtuous environment to see how long that last. And we feel very well positioned to support our clients. And so we're seeing good activity. And I think our client relationships are getting stronger, and our job is to continue to execute.

Okay. Whether by luck or by foresight, you guys formed the Capital Solutions Group. which seems like very well positioned to support what looks like an investment super cycle to your point earlier on. So just talk about that group, think about it last year, you formed it. Talk about what's happened so far, how you think it helps support the broader investment cycle.

Yes. So we're a year and change into this and feel very good about how it's going, but also the forward. We essentially created through various parts of the firm, an integrated comprehensive suite of origination and sourcing capabilities, structuring and risk management capabilities and distribution capabilities, core capabilities of our firm, but we put them in one unified platform and business with one unified set of incentives, very important. And importantly, this operates across public and private markets. And obviously, both public and private markets have shown enormous growth in the last handful of years. To give you a sense of the scale, last year, and bigger this year so far, we worked on $2.7 trillion of league table volume in the capital markets coming out of the Capital Solutions Group and about $200 billion of non-league table financing. So an enormous scale in the context of capital provisioning in the world. We believe that there's a lot of capital in the world, but the aspect that's in short of supply is origination. So ideas, sourcing of opportunities, particularly attractive opportunities. And we believe that Goldman Sachs should be the most powerful engine of that deal flow. Now we can say that, but we actually have to go do that. And we got to get ourselves organized to make sure that we're doing that to the best of our ability. We feel like we sit right in the center of this investment super cycle right now. And so we've got to make sure that we're doing everything we can to get that provisioned out to the world, to our clients. And obviously, we can be part of that provisioning as we get into it. So our job when we meet with clients is to offer multipronged solutions. We want to have a holistic approach. We can talk about public markets, private markets. We can talk about any number of structures, lots of risk management capabilities. We can show lots of transactions out to our clients. We can participate alongside them. But through the advisory aspect, including structuring, distribution, allocation to clients, co-investing with Goldman Sachs, there's a lot here that I think is very virtuous for us and for our clients. We'll become a much bigger co-investor through Asset & Wealth Management as we source more of this product. And I would just say that demand is quite strong. I mean as you've heard, I know you heard a bunch of this yesterday, the demand for financing in the world right now is extraordinary. And we're exceptionally well positioned to do that. We have -- not yet public, quite a large number of sizable infrastructure financings, a bunch related to AI, not all, that are some of the largest transactions we've had the opportunity to work on. And I think that will continue for some time. As you think about $700 billion, $800 billion of capital just in the AI infrastructure alone, that all has to get financed. And so we sit at the center of that. I think that's a pretty attractive place to be at the moment.

Okay. How do you think about risk management as it relates to financing, particularly as we see market backdrop, a lot of banks are getting aggressive in deploying capital towards these activities.

Yes. So Goldman Sachs is 156, almost 157 years old. And I think risk management has been a core part of the firm all the way through. It is really essential to our DNA. It's partially how you survive, maybe not partially, it's kind of largely how you survive for that long and thrive for that long. We focus a lot on people. We focus a lot on process, and we focus a lot on preparation. And then we have a pretty well-organized infrastructure to work on those 3 aspects. We do a lot of stress testing as do a lot of other people, but we're pretty intense about our stress testing. And we use that to govern how we set risk limits across the firm. So we think about what could happen, how could it happen, what are the correlated effects that could happen as you think about different scenarios and you tend to set your risk limits in any aspect narrowly and then more broadly as you think through those stress testing scenarios. And we like having many eyes across positioning. So one thing that I think we do well, nobody is perfect, is we have a very socialized view of a lot of people are looking at risk all over the firm, people at the front end, people in the middle, people on the back end, first line, second line. There's a lot of eyes on this. We like that. And I would say we have a mark-to-market culture. So we mark our books kind of all the time. We like that because it gives you clarity on kind of where real market prices are with liquidity. You can sometimes [ pool ] yourself if you think you've got an asset that you got marked in a certain place. But if you really want to move it, all of it or a big chunk of it, you really can't. So we like to have the notion of where could we actually -- where is the price discovery where we could actually sell this, particular security or asset that sits on the balance sheet. And we have an obsessive focus on liquidity as any bank should. And right now, I would say it wouldn't be surprising, we're running with elevated levels of liquidity. Our balance sheet has grown quite a lot as we support our client franchise. Our clients have a lot of risk appetite. And so we want to support that, but we elevate our liquidity levels accordingly. So as a measure of that, if you looked at our financial statements, you would see in the first quarter, what we call GCLA or global core liquid access, which is kind of measure of liquidity, it's a measure, was around $500 billion on average through the quarter. That's about 12% higher than the prior -- the first quarter of 2025 and about 65% higher than what would have been in the first quarter of 2021. So our balance sheet has grown. Our liquidity has grown. We will continue to provision liquidity accordingly. We carry higher buffers. This is just an environment where there is a lot of risk appetite. As we've talked about, there is a lot of buoyancy. Good time to carry more buffer, good time to be a little bit more careful vis-a-vis your liquidity as you're trying to grow with your clients and support your clients. We spent a lot of time on credit underwriting standards. We spent a lot of time on counterparty credit risk, all the things that you would expect us to spend time on. And you're going to see us continue to grow, but we're going to grow in a disciplined fashion. We're going to grow looking at attractive risk-adjusted returns, risk-adjusted returns, not just returns and making sure that we're navigating with our clients we're doing in a way that's safe and sound for our firm.

Okay. Let's go back to the M&A business. I think you mentioned earlier, John, about the bias for scale. You are sort of the #1 M&A adviser been that way for, I think, over 20 years. Kind of what are you hearing from clients around the M&A cycle or the sort of bias for scale?

Yes. I think that right now, we're in more of a winner-take-most environment, which is reinforced in the public equity markets. We all talk about the lack of breadth and how sizable some of these companies have become and the gap in the multiples for the larger players and the smaller or midsized players. CEOs see that. And so they, obviously, from a capital market standpoint, see that the economics are better for the larger winners than they are for the middle and smaller sized players in the industry. And so that obviously drives a lot of their own thinking about scale. I would say, generally speaking, CEOs are confident in their businesses. They're uncertain and worried about all the risks that we just talked about. So they're not ignorant of that and ignoring and not focusing on it. But they're generally looking at their business and saying, my business is pretty good. And so when your business is good, you have the mindset of doing more strategic activity. It's pretty highly correlated to CEO confidence. We see that. So -- and they power through some of the uncertainty because they see the underlying data is strong, and they project their businesses to be strong. I would say it's not a scale for scale's sake world, though. We have seen M&A cycles where it's been kind of -- it's conglomerate approach, right? We want to be the large conglomerate and have all these different businesses. This is, to me, scale alongside fit and focus. So you want to be in a winner-take-most environment, you want to be really big and really predominant, particularly in areas where the market is rewarding you for growth. And if you're in a business where you don't have that scale and you don't have that growth, you're probably getting out of it. So you may be doing a spin or a split or a carve-out of sorts. And so we see that quite clearly. I think that the margin picture and the growth picture is much better for the larger companies. And so that is coming through loud and clear. AI is clearly an accelerant to this. It drives, I think, the bias for scale, and announced M&A volumes this year are going to be right now, $2 trillion. We're on track to be near the record, if not breaching the record of 2021. So -- and I think that our backlog is still good. We're a pretty good barometer of that. I think activity is remaining strong. Conversations are happening. There's more bias for consolidation in these industries. Interestingly, it's really a corporate-led market. So I think corporate M&A is up like 62% year-over-year. Private equity is down 4%. That's the reverse of what we've seen for the last 5 or 10 years where it's been much more of a private equity-led environment. I think that corporate activity continues for all the reasons I just said. And I actually could paint a picture where it could accelerate from here on what's already a pretty good run rate. The private equity piece is harder to call. I think we need to season a little bit more as we get into some of the valuations that the private equity firms have on some of these businesses, but that's a big source of upside. You've got $1 trillion of dry powder and $4 trillion of embedded portfolio company valuation owned by private equity and venture capital firms. So if that engine turns on, we're going to get another step function uplift. And at Goldman Sachs, we feel really good about our position. We have an almost $300 billion lead in the lead table at this point in the year, which is our largest lead ever at this point in the year. I hope I didn't just jinx that. But I just have to say this is a very special franchise. I'm having dinner tonight with a group of our senior M&A banker. This is an incredibly special franchise that I think will continue to flourish in this environment.

I guess you are seeing the M&A business, the whole winner take most for Goldman as well. Maybe just talk through how the M&A business impacts the broader franchise. Is there a multiply effect as you win all these deals and it benefits other businesses at Goldman?

Yes. I appreciate you asking me that question. I think this is an underappreciated part of our story and our firm. And I think a really good example of One Goldman Sachs. We are doing a better job in the last 5 or 10 years of bringing the whole firm to our clients. And that includes in our M&A business, where we've been really good, as I said, for over 20, 30 years, but we're actually doing a better job coming to our clients and saying, we can do a lot of things for you in addition to the advice we're giving you in the boardroom on how to put this transaction together. And so we're a much bigger financier. We deliver more risk management solutions in a holistic integrated fashion where clients are really valuing that, particularly if you think about confidentiality and speed. If you don't have to go talk to 8 or 10 or 12 providers of financing and risk management when you're trying to do a significant merger and you can do it with 1 or maybe 2 parties and then you can open up later once it becomes public, you gain a real advantage. And I think that we're seeing more and more of that, and we're benefiting from it as our clients. So with the advent of the Capital Solutions Group, we see a real multiplier effect to your question, where in the deals where we are an adviser and we have the opportunity to bring financing and risk management solutions, we see our revenues in totality in those transactions at about 140% of the adviser revenue. So we're seeing a real -- a clear pickup in the provisioning of our services and capabilities to our clients and then the attendant revenue that comes on the back of that. And we think we're uniquely positioned to continue to do that. It has to be where it's serving the clients' interest, and it has to be where we're providing real value to the client. The client has to want us to be doing that, but we're very good at doing it, and it obviously has a significant multiplier effect across our franchise.

Let's talk about the IPO market. Obviously, very topical just now with some major IPOs coming down the pike. Just given your position here as another leader, kind of what's your outlook for the IPO backdrop, particularly if we get into sort of market volatility?

Well, if you put the IPO market in context, we've had a relatively tempered environment actually for quite some time. 2021, we had $610 billion of IPO volume. lot of SPACs, a lot of other activity. So it was an extraordinary year. But if you look at '22 to '25, the average volumes were about $150 billion versus that $610 billion. And if you go back to '17 and '19, it was around $200 billion. So that's kind of been the run rate of [ life ] other than that one extraordinary year, call it, $150 billion to $200 billion of value -- of volume. Year-to-date, we're at about $85 billion, which is actually up like 80% year-over-year. So we're climbing from what I would say has been a relatively more depressed volume level. And I would say we're pretty constructive about the environment right now. Market has been healthy, really all the way through the second quarter. We've actually seen in the last few weeks, some very successful and well-supported IPOs, which is a good sign. I think we have to keep an eye on the risk premium in the market. We talked about in your macro question, what are the elements that could derail us. Any number of those elements, whether it's inflation, rates running away from us, geopolitics, supply shocks, there's any elements that can impact the IPO market because the IPO market is a risk market. It's the risk premium, it has a real impact on how people think about allocating into new companies in the IPO market. There's obviously plenty of speculation about the mega IPOs that are coming. My comment on that would be these are exceptional companies. They're right in the eye of that CapEx cycle. So there's an enormous amount of opportunity for many of these companies. And if they choose to come public, I think the demand will be very, very healthy. Plenty of concerns and questions about how much demand will there be. These could be quite sizable transactions. we tend to see an enormous amount of liquidity and capital in the world that wants to allocate into growth, into this theme, particularly when you get into some pretty exceptional companies. So we're pretty constructive about it. We'll see how it goes. I think the IPO market is a momentum market. So the likelihood of success in some of these mega transactions, if they happen, will unlock further activity and will have, I think, a beneficial impact across the markets. It will certainly -- there'll be an impact on the way equity markets trade and people will be swapping in and out of different securities, but I generally would take a pretty constructive view.

Okay. Let's switch over to your Asset & Wealth Management business. It's about 1/4 of the business, the firm. And we've actually enjoyed pretty durable and strong growth, double-digit top line growth. Remind us again what -- how your platform is differentiated relative to peers?

Yes. So as you point out, this is a really important growth engine for Goldman Sachs. We see a real secular opportunity across this platform. As I said, it's $3.7 trillion of AUS, and it's really 3 large businesses, liquid active asset management, alternatives and private markets and ultra-high net worth wealth. It's scaled. All 3 of those businesses are scaled. We think it benefits a lot -- this business benefits a lot from being attached to our sourcing engine and our investment banking and other kind of origination capabilities. We have very broad investment solution capability, public and private markets. We continue to work on that and develop that further. Our Wealth platform is extraordinarily powerful. And as we're talking about whether it's mega IPOs or continued growth in the economy, wealth in the economy is growing at a very rapid clip, particularly at the high end. And we have world-class risk management that permeates those businesses. So we like the setup of this platform. And we're increasingly, as I said, focused on One Goldman Sachs as a value proposition to prove the synergy of having this business alongside the other businesses in the firm. And we're building strong partnerships with the largest asset allocators in the world. So when I look at the strength of our partnerships with who you all would think of as the largest allocators of capital in the world, I feel really good about the momentum that we have as we're proving the theory that we have more to offer these clients in terms of partnership. We are trying to grow our more durable management fees on our private banking and lending revenues double digits. We manage and move the firm towards having a consistent double-digit growth rate across those more durable revenues. To that end, we're also increasing our targets, right? So we recently advanced our longer-term targets for growth, taking our pretax margin target, which was at 25% to 30% and our return target, which was a mid-teens target to high teens, evidencing our confidence and also evidencing our stated objective to position the business to grow faster and at higher margins and deliver higher returns. That -- back to the point about scale, that requires more scale, that requires more investment. It requires some generative AI capabilities. This is a $17 billion business. It's got a lot of organic growth. It also has a lot of inorganic growth potential. We completed 3 inorganic transactions last year -- over the last year. Two of them were acquisitions, one is a partnership. In each of the 3, we added investment capabilities and solutions. We added distribution power. We added some talent. We added some technology. All of it buttressing this double-digit growth trajectory of the platform. And so we feel very good about this opportunity set.

Okay. Let's talk about your Private Wealth business, your ultra-high net worth business. You laid out some targets in January to grow organically around 5%. Actually, 1Q was much stronger than that, well above sort of trends that your peers put up. So maybe talk through what's driving flow strength in that business.

Yes. Well, I would start with, as I said earlier, the enormous growth in Wealth globally. We see -- again, we serve the ultra-high net worth market, which we characterize as over $30 million of investable assets. So this is kind of the wealthiest people in the world. It obviously runs much higher than that. The number of ultra-high net worth individuals that we have the opportunity to serve, we think, has grown at a 12% CAGR over the last 5 years. That's just a number of people. Financial wealth for global ultra-high net worth projects to grow at an 8% CAGR to $82 trillion by 2028. So those are pretty significant numbers. That's the TAM, if you will, for us in the segment of the world that we focus on. We've been doing this for 50 years. So we have a track record of serving this client base for a long time. It's really a crown jewel in the firm. We have to talk more about it and explain it more to you all as shareholders and prospective shareholders. It's a quite special part of the firm, and there's a lot of secular growth in front of us. It's a very scaled platform. It's about [ $1.8 trillion ] of client assets, little over $10 billion of revenues, growing double digits. And as I said, a lot of secular growth in front of us. We're quite well positioned to attach ourselves to that secular growth. And so as you pointed out, we introduced a new target, which we call long-term fee-based asset growth of about 5% annual long-term fee-based asset growth, which is our commitment to capturing a significant portion of these flows that are coming in the marketplace. The business has actually grown at 11% CAGR since 2021. So we have been growing at double digits. As you pointed out, in Q1, we grew our long-term fee-based assets at a 7% growth factor versus our 5% target. That was $22 billion in net flows. Our year-over-year growth in long-term AUS was 18%. So we're seeing quite strong growth in this platform. We see it as a double-digit grower for quite some time to come. There's really no reason why it should not be as long as we execute. And obviously, these mega IPOs that you asked about create another large wealth opportunity in the world for our clients. We like our positioning there. And so I think that will be -- that could be another big accelerant. This business, however, to make it grow this way, you can't just sit back and let it happen. You have to invest. And so we have a very clear objective to keep investing for growth here. We want to grow our client footprint. We have about 1,000 advisers. We will grow that adviser footprint to serve more clients. And as you grow advisers, you grow the ecosystem around those advisers to leverage them to be able to serve more clients. And so we'll have more content capabilities. There'll be AI infused into that capability set, but that's a big client footprint opportunity. We will become a bigger lender. If you think about Goldman Sachs and Private Wealth, we've really been driven by advisory, not unlike the way we built our investment bank as an advisory firm that became a much bigger financier. This will be a very similar phenomenon where you'll see us start to become a much bigger lender. We already have become a much bigger lender, but the trajectory there is quite clear. We've grown our lending business at about a 9% CAGR over the last 3 years. We'd like to continue to do that and better. That's a big focus, have to keep investing in that platform to do so. Third area would be around private markets and alternatives, where we fortunately have a very long record of serving these clients. We're going to build more customized solutions, more products, more capabilities. And then obviously, the fourth major is technology, which has a lot to do with digital and generative AI, which will be a big driver of our growth going forward.

Okay. Lastly, you talked about growing the third-party wealth business. Remind us again the key areas of focus here and how you can drive growth from here?

Yes. I think the same comment applies. So now we're talking about everybody else's wealth channels that we have the opportunity to put our products and solutions on to. Extraordinary growth. So while there's been extraordinary growth in the ultra-high net worth category, there's likewise been extraordinary growth in the high net worth and mass affluent categories. This is an area unlike an ultra-high net worth where we're well penetrated with a big opportunity to keep penetrating further, we're very underpenetrated in third-party wealth platforms. We didn't build a big capability there over a long period of time. And so we are catching up, which I think is another double-digit growth opportunity for Goldman Sachs. In fact, we grew our long-term AUS in this channel at a 25% growth rate in the first quarter of 2026, showing you that we have a lot of momentum, obviously, off a smaller base in our own wealth channel, but there's a lot of runway here. We see global retail AUM growing at about a 9% 5-year CAGR historically. If you look in the RIA community, just take a snapshot of the RIA community in the United States, that's growing, we think, at a 12% CAGR. Assets now $10-or-so trillion, expected to add another 300 basis points of share of the overall wallet by 2029, extraordinary powerful growth channel in the United States. We've been investing heavily into the RIA community. We just recently hosted our third annual conference where we bring together some of the larger RIAs in the United States together. I've spoken at all 3 of those events, including recently a couple of weeks ago. Interestingly, in the recent event that we just hosted, the cohort that we brought together has seen their assets grow 60% since 2024. So just that cohort, which represents a larger size and scale of the RIA community. So the growth continues to be extraordinary. And our job here, again, with the One Goldman Sachs lens is to serve them holistically. We have a lot of things we can do to help RIAs run their businesses and serve their clients. We have a digital custody platform, which we think is a pretty interesting and unique platform. We can do a lot of lending, banking services, obviously, a big investing solution capability, product suite, models and so forth. We can execute very well for them in the markets. We give them advice from an M&A perspective. A lot of these firms are doing roll-ups and the like. And then there's a lot of investor and adviser education that we're doing to try to educate on private markets, private credit, any number of aspects that would be worthy of education, we provide a lot of that as well. So there's a holistic bundle, if you will, that we're really provisioning in a partnership mindset with the RIA. So our strategy here is quite clear. We want to leverage our scale and our breadth, our capabilities. We're expanding our product suite. and we're partnering. We're a really good partner for the RIAs. And I think that momentum is starting to become clear and apparent. And I would highlight, we just did a partnership as one of those 3 transactions I referred to with T. Rowe Price, which is, again, a good opportunity for us to expand our capabilities into U.S. retirement. We didn't build the U.S. retirement distribution capability. T. Rowe Price has an extraordinary capability. And so that's a good partnership for us to allow for our products and solutions to be running through that channel.

Okay. Let's switch to the alternatives business. You set annual fundraising targets for 2030, a goal of $750 billion of fee-paying AUS. I believe private credit was a substantial part of that strategy. Clearly, we've seen some disruption in that market. how are you thinking about achieving those targets?

Yes. So as I said, we have a scaled private assets alternative platform. It's about $645 billion of total assets. It's close to $430 billion of fee-paying assets. So it's a sizable player. And we've been about 35 or so years doing this. So we started as kind of a merchant bank. And with our Private Wealth clients, we didn't start as a big institutional fundraiser. But we've been doing this every bit as long as the other major players that you all would know well. We have this incredible origination funnel in our investment bank largely, which is a great alpha generator of products and solutions. And we're very global. So our alternative asset management franchise is very global attached to our broad Goldman Sachs global franchise. We're largely an institutional player. We grew up as an institutional player. We started with our own capital. We invited in Private Wealth clients, some other institutional clients. So we're largely an institutional player. We're not really a retail player at scale. And we have raised $464 billion of funds into our private markets capabilities since 2019. So we have been one of the most prominent, largest fundraisers in the marketplace over the last 5 or 6 years. We're now running about $2.4 billion of management fees in alternative asset management products on a year-over-year basis through the first quarter. That obviously is growing at a very nice clip. We see right now very strong demand for our products and solutions, particularly in the institutional marketplace. I think you're seeing institutional asset allocators now assume there's going to be more dispersion in performance, and they're consolidating more of their provisioning to those they think will do better through whatever cycle we may be heading into. That's been beneficial for us. We see it in our fundraising. You pointed out our first quarter fundraising number was about $26 billion. $10 billion of that was private credit. So with all the how and press narrative on private credit, we actually had a very good first quarter fundraising, largely institutionally, where we see institutions allocating more into what they think is kind of a disruptive market and seeing Goldman Sachs as a strong player with a lot of track record investing through these cycles. And even in the third-party wealth channel, back to your earlier question, where we do have these evergreen structures, our BDC actually has been outperforming. So while there's been a lot of outflows in that arena, our BDC had -- our primary BDC had 7% net inflows, again, evidencing pretty strong underlying credit performance and a lot of confidence in Goldman Sachs as a purveyor of private credit capabilities. So in that another business, we think we can grow double digits. We set, to your point, a new fee-paying target of $750 billion by 2030. So we're now at $429 billion. Our target is $750 billion. We see enormous opportunity here, and we should continue to be very much a beneficiary of this, I'd say, consolidation of the fund allocations.

Okay. Good stuff. Obviously, a very strong backdrop for the top line. A lot to dig into operational efficiency. You touched on One Goldman Sachs 3.0, which I think looks a lot about -- looks a lot in terms of transforming your -- how you operate. Just provide more details on where you are in that journey. What are the key goals? How AI is helping you drive better efficiency across the firm?

So this is our large-scale transformation effort across the company. One of, if not the most important things we're working on in the firm right now. I would characterize it as 4 primary elements. One is literacy and adoption. So I think we all need to struggle with our own literacy and our own adoption of these tools. So we are really pushing hard to increase the literacy level and the adoption rate inside our company. And there's a whole series of aspects of that. That's the first thing. The second thing is what I'll characterize as software development life cycle, which is essentially the coding and the aspects around coding of building software in a company like our large enterprise, how we do that. The third area is broad process reengineering. How do we do things in the firm? How do we process onboarding of clients? How do we process lending? How do we process operational settlements or transactions? How do we process investment banking pitch books, et cetera, et cetera. And then the fourth, and I think probably the single biggest unlock at the end of the day, when we look back on how we all did here is the client value proposition. What do we do with our data and our tooling and how do we get it to our clients more effectively, deliver more insights faster with more analytical rigor to make those relationships more valuable and to give the clients more of an ability to use all of these tools. So our goals relate really to scalability. We kind of said to ourselves, if we want to grow our firm double digits, we want to be this earnings grower that we talk about. We need a better infrastructure to do that. We need that scalability. So we're working hard to ensure we can actually do that to deliver that kind of growth rate. Obviously, productivity, efficiency, there's margin improvement embedded in all that. But there's also client experience, employee experience and risk management, all super important. We want our employees to feel good about the tools. We want them to be more productive, more confident. We want our clients to use the tools, and we want to become better risk managers. Those are super important aspects. So we've built what we call a GS AI Assistant platform, which is our platform where we get the adoption where people use it. We have the latest cutting-edge models on there. We're partnered with all the leading tech players you would expect us to be partnered with, and we are encouraging and helping people to figure out how to use that inside our firm. we measure the adoption rate quite carefully. We now have 40,000 users on the platform, which is darn near all of our employees. And there were about 2 million prompts last month on that platform. So we're measuring that just to try to see how much prompting is going on. And we're doing a lot of work teaching people and including myself, how to be a better prompter. We see -- on the software side, on the software development side, we see significant productivity gains. That's probably the place where you can grab hold of productivity gains the most. We would -- on our measurement, we would say there's 20% productivity unlock in all of our software development work through the whole life cycle, not just the coding, but through the whole life cycle. But in some discrete cases, it's materially better than that. So you could point to certain things we're doing where the productivity unlock is a lot more than 20%, but 20% would be kind of a reasonable number across the platform. And I would say that what we get with that productivity unlock is we get the ability to drive more output. So the way we're spending that productivity unlock is we're trying to be faster in our cloud migration. We're trying to be faster in our data lake house build and our data strategy. We're trying to have more tooling that we can deliver to clients. We're trying to release more capacity into the system for innovation. And so we're essentially spending that productivity as we should to try to drive more of that output with the same number of engineers. We have 6 large use cases in that process reengineering part, which is the third aspect that I talked about. These are foundational firm-wide processes. I named some of them onboarding, lending, vendor management, enterprise risk management. These are processes that run horizontally across the firm that we have to scale, automate, digitize and make foundationally modern. And we're doing that. I feel really good about the progress we're making. You'll see us accelerate the investment we make into tooling for clients, which is that fourth vector. I think this is an area where we have to continue to invest more. And so we're releasing more investment in that arena, which I think is going to really help us strengthen our value proposition with our clients. And then I would say, finally, there's to me 2 long poles in the tent that are challenges, certainly for Goldman Sachs, I would say in my client conversations, I think for most enterprise clients, which are data, which most of us don't have in particularly perfect order and cultural change. You have to engender a lot of cultural change in these organizations to get the full benefit about this of this. But I'm super optimistic about the progress. But I just want to remind everybody, enterprise-wide full deployment takes time. It does not happen overnight.

Fascinating. We're running short on time, so I'll just move to maybe a question to wrap it all up here. Clearly, very strong execution from the management team, tailwinds around the backdrop. Investors are noticing it. The stock has gotten a fairly rich valuation. How do you think about shareholder value from here? What would you -- what would be a message to newer investors that want to get?

Rich valuation is in the eye of the beholder, right? There aren't that many companies that grow double digits and can prove that through cycles. So that's our job. That's our execution task. Far and away, the most important element for us is to accelerate our earnings power and to raise the floor on our returns. That's our job. I think we have, as I've outlined in your very good questions, we have a significant growth opportunity in front of us. We're in a very virtuous cycle right now. We don't know how long it will last, but it feels pretty pretty durable to me, given some of the underlying drivers. We definitely have some tailwinds. Deregulation, we didn't really get into regulation, but deregulation is a tailwind. I think AI is a big unlock and tailwind opportunity, both financing of it and utilizing it. So our job is to capture the cyclical opportunity, and there will be a cycle at some point, but this cycle could run for a while in our Banking & Markets businesses in particular. And to your question about this multiplier, this financing opportunity, we've got a big multiplier opportunity across the financing landscape to drive even better growth and better returns. The Capital Solutions Group sits, as I said, in the center of the investment ecosystem right now. I think it's an enormous opportunity for Goldman Sachs. We're not the only ones attacking that, but I feel really good about our competitive position there. One Goldman Sachs, which we will continue to drive as our operating system, gives us the ability to keep driving more wallet share improvement. AI will give us more opportunity to unlock the value proposition to be better for our clients and therefore, gain more share of wallet be more important to them, drive more synergies across our platform. And then Asset & Wealth Management is a secular growth story. We have really well-positioned businesses there. We see a lot of secular growth across those businesses, and we have to execute well there. And then on One Goldman Sachs 3.0, as I said, one of the most important things, if not the most important thing we're working on for the firm over the next many years to drive scalability, margin improvement, strengthening our client franchise and drive more top line growth. So we'll keep investing in our people. We'll keep investing in our culture. We are attracting a lot of talent to the firm in various aspects. That's really important. This is still a talent. We're not AIing everything yet. This is still a talent-driven business. We need talent. We're attracting a lot of talent. And we focus a lot on risk management, as I said. So I feel great about our positioning. We're going to capitalize on the opportunity, and our job is to deliver this durable earnings power through the cycles to adjust your comment from a rich valuation to not a rich valuation.

Fantastic. I think that's a good place to end it. Thank you very much, John.

Thanks for having me. Appreciate it.

Thank you.