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

JOBS Act Propels Real-Estate Crowdfunding Platform

Oct 21 2014 | 2:57am ET

If D.J. Paul were a real estate development, he would be described as “multi-use...

Lifestyle

Strippers Accused Of Robbing Hedge-Fund Manager Face Jail

Oct 20 2014 | 9:20am ET

A group of alleged stripper-thieves—whose victims include a hedge-fund manager...

Guest Contributor

PAAMCO: European Equity Exposure - Challenging Year, But All is Not Lost

Oct 16 2014 | 4:12am ET

European equity hedge fund managers have had a tough time so far this year. The...

 

Videos

Editor's Note

    Must Attend Hedge Fund Charity Events For October

    Sep 30 2014 | 9:29am ET

    The crisp Autumnal days of October are upon us, and so are a few of the hedge fund industry’s favorite charitable events. If you have never been to Rocktoberfest, well, you are missing out. And for a quieter evening of sipping and socializing, stop by HFC’s Wine Soiree. Read more…

 

Futures Magazine

October 2014 Cover

Deeply flawed risk benchmark

Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...

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.