Goldman Sachs is a powerful place. I remember my first visit when one of the executives set me straight with the analogy: ”Goldman Sachs is the Harvard of finance firms”…. or perhaps the NY Yankees of Baseball. And the impression I got of the place was consistent with these analogies: Impeccably dressed, energetic folks zipping around a gorgeous office in downtown NYC.
But today Goldman – as well as other firms like JP Morgan and Morgan Stanley – face challenges on many fronts, hence have turned to creating mutual funds for ordinary investors as a key source of revenue. On the surface, it sounds great; who wouldn’t want these bright, influential types managing accounts for retirement savers?
But it’s another case of something glittering that’s not gold – as history has not shown these firms to be particularly good at managing retail Mutual funds. And the funds created by Wall Streets biggest name of all – Goldman – have been particularly disappointing, with only 12% of the firms mutual funds outperforming their relative benchmarks over the last 10 years!
Like anything else in life, first impressions can be deceiving and we can’t always judge a book by its cover. And while I can’t weigh in on the quality of Goldman’s work for its institutional client base, it’s pretty clear that when it comes to managing regular Mutual funds for ordinary savers and 401k participants – The Goldman glitter has not turned into gold.