Goldman Sachs Asset Management has absolutely no intention of stepping away from its money market business in spite of admitting concerns over profitability and regulatory action, according to a report published by the Financial Times.
Andrew Wilson, co-head of fixed income and global liquidity management at GSAM, said: "Money market funds are not going to go away. Money markets are now a less profitable part of the business. We need to have money markets as one of our product offerings."
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Leaked reform proposals from the European Commission showed that, if upheld, European money fund managers will be required to set aside cash buffers of 3% or the market equivalent of 15 billion to absorb losses.
The proposals form part of a global regulatory backlash against constant NAV money funds, which invest in high-quality, short-term money market instruments and trade at a fixed 1 or $1 a share, except in extreme circumstances.
The concern in Brussels and Washington is that constant NAV funds are prone to massive and sudden redemption requests, which can create systemic risks.
Goldman’s money fund assets have slumped by roughly US$100 billion, to US$196 billion, since the end of 2008.
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By GlobalDataWilson said: "It is a real possibility that we will see consolidation in the market and I would not be surprised at all to see smaller domestic players drop away.
"Obviously our assets are down from their 2008 peaks as they are across the industry, but our money market assets are now not too different to that of pre-crisis levels," he added.
