Global asset management firm Goldman Sachs has drastically cut its exposure to alternative investments in order to comply with the Volcker Rule, Reuters has reported.
The Volcker Rule was introduced in 2010 as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act. It was originally proposed by former Federal Reserve chairman Paul Volcker with a view to reining in behaviour by financial institutions that was thought to have led to the global financial crisis. It prevents these institutions from committing more than three per cent of its Tier 1 capital to investments perceived to be risky or speculative.
The firm has decreased its commitments to hedge funds, private equity, credit and real estate funds by $5.8bn, the report said, close to 48 per cent. Its exposure to these funds amounts to 14 per cent of this core capital, it said, though ongoing private equity allocations increase this to 17 per cent.
While Goldman Sachs currently has $15.6bn committed, with $6.2bn of upcoming allocations, it previously had $27.4bn of commitments to this space in June 2010.
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