Goldman reworks its private equity practices

The owner of the world’s largest private equity outfit is introducing greater transparency to its operations.

In a 63-page report released this week, Goldman Sachs has reworked how its private equity holdings are reported to authorities and has put in place measures to confront potential conflicts of interest in its operations. 

In a move designed to communicate more clearly the various sources of its revenues, the firm will structure itself under four distinct business segments, one more than the current three. 

Under the changes Goldman will report its private equity interests, currently classified under “Trading and Principal Investments”, to the newly created “Investing and Lending” division.

To minimise potential conflicts of interest, the bank said it will also cease acting as the sole financing source for acquisitions made by the group’s private equity arm, ranked in last year’s PEI 300 as the world’s largest with $55 billion in capital raised over the past five years and the fourth largest private equity real estate firm as ranked by the PERE 30. 

Goldman also pledged greater disclosure in instances where the firm acts as an underwriter for companies affiliated with its in-house funds; and will update its review process when bidders are competing for acquisition financing alongside Goldman-backed funds.

The proposals result from an eight-month review of the investment bank’s business standards and practices. The self-assessment came weeks after the US Securities and Exchange Commission charged the bank with defrauding investors over investments tied to the subprime mortgage crisis. Goldman later paid $550 million to the SEC in a settlement.

Goldman will issue its fourth quarter earnings report next week under the new format.