Goldman Sachs (NYSE: GS) has announced plans to boost their private equity investments and targeting smaller and high growth firms in hopes to offset recent trading declines. The bank usually focuses on advising large companies on mergers and raising capital but is now looking to own funds to finance smaller companies in the next couple of months. Such companies include Uber Technologies as well as industries outside of Silicon Valley as Goldman aims for early stage investments.
Goldman Sachs aims to add $5 billion in annual revenue after a decline in bond trading and hopes to lend more, think of creative deals to pitch to big clients, and convince more investors as well as corporations to trade with them. Capital will be coming from the allocated balance sheet while individual investments is likely to cost tens of millions of dollars. The bank aims to make it easier to handle public offerings or sales as well as profiting from the investments. Private equity gains helped Goldman beat Wall Street third quarter estimates even after trading revenue had fallen.
“Part of Goldman’s core business is its ability to take equity stakes in companies they’re working with,” said Marty Mosby, an analyst with Vining Sparks. “It may create more volatile outcomes, but ultimately it’s more within their competency than other businesses they’re trying to get into.”