Goldman Seeks Volcker Exemption For Lending Hedge Funds

Oct 10 2012 | 1:01pm ET

Anyone who thinks that the Volcker rule is a done deal doesn't work in the executive suite at Goldman Sachs.

The Wall Street giant is vigorously fighting to exempt at least one lucrative business from that rule's strict limits on hedge-fund investing. At issue are Goldman's direct-lending funds, run by its merchant-banking arm.

Goldman has spent more than $8 million lobbying on the Dodd-Frank financial regulation reform, which includes the Volcker rule, since its passage. And one of its chief arguments is that credit funds such as its $10.5 billion GS Loan Partners and $13 billion GS Mezzanine Partners should be exempted from the rule, which bars banks from accounting for more than 3% of a hedge fund's capital. Goldman accounts for about 20% to 30% of the funds' assets.

With regulators still hammering out the details of Dodd-Frank, Goldman is making its pitch that direct-lending funds are important to the economy, increasing the availability of credit. It also argues that direct-lending funds are less risky than other hedge funds.

According to The Wall Street Journal, regulators have been noncommittal about credit funds.

In case its blandishments fail to sway the powers that be, Goldman has struck upon a Plan B, the Journal reports. It would take advantage of loopholes in the 1940 Investment Company Act—Dodd-Frank defines hedge funds as pools exempt from registration requirements under that 72-year-old law—that exempt funds "making small loans, industrial banking, or similar businesses," such as real-estate, oil, gas and mining. The new funds would be smaller, and Goldman would invest less in them, than the current funds.

Goldman has already begun to unwind its investments in other hedge funds, pulling $500 million in the first half.


In Depth

Q&A: Neil Azous Talks Global Macro Investing

Nov 24 2014 | 12:41pm ET

Neil Azous is the founder and managing member of Rareview Macro, an advisory firm...

Lifestyle

Scene Last Night: Clinton, Schwarzman, Corzine, Neidich, Diamond

Nov 25 2014 | 5:52pm ET

Steve Schwarzman had a granddaughter yesterday morning. Last night he sat one table...

Guest Contributor

Why The Big Money Is Going To Europe

Nov 14 2014 | 6:03am ET

Peer-to-peer lending was invented with the individual investor in mind. But despite...

 

Sponsored Content

    For Hedge Funds, Mastering Data Is Key To Success

    Nov 4 2014 | 9:45am ET

    Data management is important to every business, but for hedge funds, it is critical. FINalternatives recently asked Peter Sanchez, CEO of Northern Trust Hedge Fund Services, how fund managers can deal with the demands of managing data while at the same time remain transparent and abide by operational best practices. Read more…

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

November 2014 Cover

Building a better market

Reg NMS created a huge bifurcation in equity markets and while much of what has followed has been positive, in terms of lower fees and greater liquidity, many traders would like to see the market come...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.