trends & morningstar investment summit...
TRANSCRIPT
“Pick Stocks, Not Markets”
The Importance of Bottom-Up Investing in Emerging Markets
Goldman Sachs Asset Management
Brussels, March 9th, 2016
FOR PROFESSIONAL INVESTORS USE ONLY. NOT FOR DISTRIBUTION TO GENERAL PUBLIC
Trends & Morningstar Investment Summit 2016
2
Executive Summary
Source: GSAM, as of Mar-2016
We believe
Inefficiency at the stock level in EM creates tremendous alpha
opportunity
Outsized returns are generated by investing in sound businesses at
substantial discounts to intrinsic value
II
III
Challenges related to growth, divergence and index composition have
created uncertainty for investors I
4
A declining growth premium has challenged investor
perception of Emerging Markets
Source: IMF, World Economic Outlook Database, Oct-15.
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.
Please see additional disclosures.
-1
0
1
2
3
4
5
6
7
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
An
n.
GD
P E
M/D
M g
row
th d
iffe
ren
tia
l (%
)
5
Downward growth trend disguises increased divergence in
growth cycles post-crisis
Source: Goldman Sachs, as of Oct-15.Countries shown represent the five largest emerging market economies, by nominal GDP.
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.
Please see additional disclosures.
0
3
6
9
12
15
2002 2003 2004 2005 2006 2007
Rea
l GD
P G
row
th (
yoy
- %
)
Brazil China India Russia South Korea Average
-5
0
5
10
15
2010 2011 2012 2013 2014 2015
Rea
l GD
P G
row
th (
yoy
- %
)
Pre-crisis – more homogenous growth patterns Post crisis – greater divergence in growth
6
Dominance of SOEs and ‘success stories of the 2000s’ in
traditional EM benchmarks has created additional uncertainty
1 Source: Datastream, MSCI, UBS Estimates. Data as of 30 September 2014. 2 Source: Datastream , MSCI, GSAM calculations. Data shown for respective MSCI indices, as of Oct-15.
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.
Please see additional disclosures.
SOE % of country market cap1 Trailing 12m earnings growth2
0
100
200
300
400
500
600
2003 2005 2007 2009 2011 2013 2015
Tra
iling 1
2m
earn
ings –
Index,
100=
Mar-
03
Energy Materials EM
8
Stock specific factors are increasingly the dominant driver of
performance in EM
1 Source: Citigroup, “Quant in the Citi”, as of Sep-15.
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.
Please see additional disclosures.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
HP
Filt
ere
d A
dju
ste
d R
-Square
d
Country Only
Country and Industry
Stock specific
Decomposition of EM performance drivers
9
Inefficiency at the stock level in EM creates tremendous alpha
opportunity
1 Source: Goldman Sachs Portfolio Strategy Research, “The EM flow outlook for H2 2013”, 04-Aug-2013. 2 Source: GSAM. For informational purposes only.
Past performance does not guarantee future results, which may vary.
Dispersion in stock level returns1
90th percentile vs 10th percentile
22%
41%
63%
100%
155%
10%
19%
30%
45%
65%
0%
20%
40%
60%
80%
100%
120%
140%
160%
1 month 3 month 6 month 12 month 24 month
Sto
ck r
etu
rn d
isp
ers
ion
(9
0th
vs 1
0th
pe
rce
ntile
)
Emerging Markets
Developed Markets
Funnel of opportunity2 Small and mid cap space can offer attractive upside
11
Outsized returns are earned over time by investing in sound
businesses at substantial discount to intrinsic value
Source: GSAM. For illustrative purposes only
Industry
Business
Management
What We Evaluate
Business
Value Flow Analysis
Discounted Cash Flow
Sum of Parts
Relative Valuation
Valuation Approach
Valuation
12
Attributes influencing portfolio exposure: Importance of
sustainability of returns
As of Dec-15. Source: FactSet. Portfolio holdings may not be representative of current or future investments. The securities discussed may not represent all of the portfolio's holdings and may represent only
a small percentage of the portfolio holdings. Future portfolio holdings may not be profitable. For illustrative purposes only. There can be no assurance that the same or similar results to those presented
above can or will be achieved.
People, Philosophy, Process and Portfolio Construction
Exchanges Telecoms
Environment
Largely monopolistic businesses insulated from competitive
pressures
Capital light businesses; cash conversion close to 100%
Intense competition, multiple players
Environment heavily influenced by regulation
Implications
Sustainable return over time
Invest in largely underdeveloped capital markets that should
expand over time
Regulatory uncertainty
Competition has led to low pricing power and less sustainable
returns
Outcome Higher structural allocation to exchanges Lower structural allocation to telecoms
Case study: Exchanges and Telecoms
11.4%
0.2% 0.2%
6.7%
0%
2%
4%
6%
8%
10%
12%
Weig
ht
Portfolio MSCI EM
13
Focus on investing over the cycle, not trying to time the cycle
Source: GSAM. For illustrative purposes only. There is no guarantee that these objectives will be met..
Key differentiators
Outperformance over
the cycle
Pro-cyclical / Higher Beta Stocks (e.g. stock exchanges)
Counter-cyclical / Lower Beta Stocks (e.g. staples, pharma)
Market Cycle
Time
Perf
orm
an
ce
+ve
-ve
Magnitude of alpha is due to stock selection; Consistency of alpha is due to portfolio construction
14
We believe a balanced, bottom-up driven portfolio can lead to
consistent alpha irrespective of market environment
1 As of Dec-15. Shown since restructure (01-Jul-13). Returns are shown for the institutional accumulation share class, net of fees. 2 As of Dec-15. Shown since restructure (01-Jul-13) Returns are shown for the institutional accumulation
share class, net of fees. Both shown since 01-Jul-2013 when Prashant Khemka was asked to become CIO of Emerging Markets Equity. Past performance does not guarantee future results, which may vary. The performance data
does not take account of the commissions and costs incurred on the issue and redemption of units.
Key differentiators
Case study: Alpha generation over the cycle2
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15
Portfolio Cumulative Excess Return (net, %)
MSCI EM Cumulative Return (%)
Average Quarterly Performance in Different Market Environments1
Up Markets Overall Down Markets
Outperformed 10 out
of 10 quarters
Average Alpha: +199
bps
Outperformed 6 out of
6 up quarters
Average Alpha: +257
bps
Outperformed 4 out of
4 down quarters
Average Alpha: +112
bps
5.5%
1.1%
-5.5%
3.0%
-0.9%
-6.6%
Portfolio Quarterly Average Return (net)
MSCI EM Quarterly Average Return
15
GSAM Emerging Markets fund performance overview As of 31-Jan-16
As of Jan-16. Returns are shown for the institutional accumulation share class, net of fees. Past performance does not guarantee future results, which may vary. The performance data does not take
account of the commissions and costs incurred on the issue and redemption of units. For illustrative purposes only. There can be no assurance that the same or similar results to those presented
above can or will be achieved.
Institutional share class, net of fees 1 Year 3 Years 5 Years
GS Growth & Emerging Markets Equity Portfolio (%) -12.20 -3.70 -2.71
MSCI EM (%) -20.91 -9.24 -5.55
Difference (bps) +872 +554 +284
GS Asia Portfolio (%) -8.29 0.69 0.00
MSCI AC Asia Free ex-Japan (Net TR) (%) -18.16 -3.76 -1.52
Difference (bps) +986 +445 +152
GS India Equity Portfolio (%) -10.98 10.56 9.09
MSCI India IMI (%) -18.19 0.66 -0.65
Difference (bps) +721 +990 +974
16
Executive Summary
Source: GSAM, as of Mar-2015
We believe
Inefficiency at the stock level in EM creates tremendous alpha
opportunity
Outsized returns are generated by investing in sound businesses at
substantial discounts to intrinsic value
II
III
Challenges related to growth, divergence and index composition have
created uncertainty for investors I
18
Why GS Growth & Emerging Markets Broad Equity Portfolio?
Goal: To generate substantial magnitude of alpha with consistency through the cycle
Result: This approach has allowed us to outperform by +7.9% p.a. since restructure (net of fees)
and rank in the 2nd percentile of managers according to Morningstar1
GSAM Global Emerging Markets Equity Strategy
As of Jan-16. Source: GSAM. For illustrative purposes only 1Performance is annualized since restructure (01-Jul-13) for institutional accumulation share class, net of fees. Rankings are based on
Morningstar percentile rankings for trailing 2 years as of Dec-15. Past performance does not guarantee future results, which may vary. There is no guarantee that these objectives will be met.
• Balanced portfolio construction: Owning a combination of pro and counter-cyclical stocks
• Differentiated portfolio: Meaningful exposure to mid and small-caps as well as off benchmark
names to take advantage of less efficient parts of the market within a disciplined liquidity
framework
• Rigorous analytical framework: Adhered to in a disciplined manner
• Centralised decision making: Allows for relative value calls across sectors and geographies
and risk management at the overall portfolio level
• Philosophy: Outsized returns are earned over time by investing in sound businesses at
substantial discount to intrinsic value
• Bottom-up: Invest in stocks for the full business cycle, not to time to market
• Local presence: Team of 23 investment professionals with an average of 16 years of
experience who together conduct ~4,000 company meetings per year
• Aligned incentives: Research analysts are rewarded for alpha generated in client portfolios
People
Philosophy
Process
Portfolio
Construction
19
Product Overview & Characteristics GS Growth & Emerging Markets Broad Equity Portfolio
Note: Holdings are subject to change and should not be construed as research or investment advice. Past performance does not guarantee future results, which may vary. There is no guarantee that
these objectives will be met. Targets are subject to change and are current as of the date of this presentation. Targets are objectives and do not provide any assurance as to future results.
As of Sep-15. 1 Strategy AUM as of Oct-15. 2 Performance is net of fees, annualized since 1-Jul-2013 which is when Prashant Khemka became CIO of Emerging Markets Equity.
Why GS Growth & Emerging Markets Broad Equity Portfolio?
Overview
Investment approach Bottom-up
Investment style Style agnostic
Lead Portfolio Manager Prashant Khemka, CFA
Benchmark MSCI Emerging Markets Index
Inception date 1-Apr-1995
AUM¹ US $697 mn
Available Vehicles SICAV, Separate Account
Expected Actual
Excess Return 300 bps 752 bps2
Information Ratio 0.50 1.922
Active share >70% 83%
Capitalisation All 55% in small/mid cap companies
Range of holdings 100 – 150 126
Off benchmark Consider off-benchmark opportunities 46% portfolio weight in off benchmark names
20
People Experienced, locally based sector aligned team
As of Jan-16. Source: GSAM. For illustrative purposes only. Years of experience shown in parenthesis. *Denotes head of regional research team.
People, Philosophy, Process and Portfolio Construction
Client Portfolio Management
Xiangrong Jin, PhD Hong Kong
Kathryn Koch New York
India research team
Mumbai China research team
Hong Kong
Asia ex Japan research team Singapore
LatAm/EMEA research team London & Sao Paulo
Prashant Khemka, CFA (17) CIO Emerging Market Equity & Lead Portfolio Manager Singapore
Basak Yavuz, CFA*
(Consumers, Energy)
Marcia Zugaib
(Financials)
Kamlesh Ratadia
(Health Care, Industrials, Utilities)
Fadrique Balmaseda
(Materials, Telecoms)
Gaurav Rege
(IT, Industrials, Real Estate)
Kevin Ohn, CFA*
(Generalist)
Sun Hee Oh
(Consumer Discretionary, Industrials,
Utilities)
Seong Kook Jung
(Financials, Telecoms)
Yoke Fong Chee
(Energy, Materials)
Chien Hui Tan
(Consumer Staples, Health Care)
Alina Chiew, CFA*
(Banks, Insurance, Transportation)
Frankie Lee
(Real Estate)
Christine Pu
(Energy, Health Care)
Nathan Lin
(IT, Telecoms)
Shao Ping Guan
(Consumers, Industrials)
Michelle Wen, CFA
(Consumers)
Hiren Dasani, CFA*
(Financials)
Aman Batra
(Consumer Staples, Industrials, Cement,
Utilities, Retail)
Abhishek Gupta, CFA
(Metals, IT, Industrials)
Dheeresh Pathak, CFA
(Health Care, Telecoms, Media)
Sumit Mangal
(Autos, Auto Ancillary)
Niraj Mansingka
(Energy)
Luke Barrs, CFA London
Katherine Bordlemay, CFA New York
21
Profiles of Professionals
Prashant R. Khemka, CFA
Managing Director; Chief Investment Officer of Emerging Markets Equity – Singapore
Prashant is the CIO of Emerging Markets Equity, overseeing the portfolio management and investment research for the firm's Emerging Markets Equity accounts.
Prashant is the lead portfolio manager of GSAM’s Emerging Markets Equity, BRIC Equity and India Offshore Equity strategies. Prior to assuming this role, Prashant
spent seven years in Mumbai as head of the India Equity Research team. Prashant joined GSAM in May 2000 as a member of the US Growth Equity team, first as a
research analyst, then as a portfolio manager and then as a senior portfolio manager and co-chair of the Investment Committee. Prior to joining Goldman Sachs,
Prashant was an assistant portfolio manager in the Fundamental strategies group at State Street Global Advisors. He graduated with honors from Bombay University
with a BE in Mechanical Engineering and received his MBA in Finance from the Owen Graduate School of Management at Vanderbilt University, receiving the Matt
Wiggington leadership award for outstanding performance in finance. Prashant was awarded the Chartered Financial Analyst (CFA) designation in 2001 and is a fellow
of The Aspen Institute, India.
Kevin Ohn, CFA
Managing Director; Head of Asia ex-Japan Equity – Singapore
Kevin is the head of Asia ex-Japan Equity and lead portfolio manager of GSAM’s Asia ex-Japan Equity strategies. Prior to assuming this role, Kevin was the head of the
Korea Equity team in Seoul. Kevin joined GSAM in January 2007 from Allianz Global Investors, Seoul, where he spent four years as the Head of Equity Research and
then as the Chief Investment Officer of the Equity business, responsible for supervising equity investment, research and client service support, and managing corporate
governance and institutional mandates. Prior to working at Allianz Global Investors, he held positions as Head of Research at Hannuri Investment Securities, Equity
Analyst and Deputy Head of Research at Salomon Smith Barney, Senior Equity Analyst at Credit Lyonnais Securities and Equity Analyst at Daishin Securities. Kevin has
been covering the telecommunications, utilities, construction, and construction material sectors since 1987. He received an MBA in Finance and Accounting from the
Anderson Graduate School of Management at UCLA in 1993 and a BA in Economics from Sung Kyun Kwan University in 1988. Kevin was awarded the Chartered
Financial Analyst (CFA) designation in 1999.
Basak Yavuz, CFA
Executive Director; Head of EEMEA/LatAm Equity – London
Basak is the lead portfolio manager of the GSAM Growth Markets strategy and the lead portfolio manager of our N11 Equity Strategy. She is also the head of the
EEMEA/LatAm Equity team, and covers the Consumer and Materials sectors. Basak joined Goldman Sachs Asset Management in September 2011 from HSBC Global
Asset Management, where she spent three and a half years as a portfolio manager for frontier markets, focusing on Eastern Europe and Asia. During this time, Basak
also had primary research responsibility for commodities in the Middle East and North Africa. Prior to joining HSBC, Basak was a research analyst at Alliance Bernstein
in London from 2001 to 2008, with research responsibility for the Materials sector in EMEA. She began her career at Alliance Capital in Istanbul, where she worked from
1997 to 2001. Basak has BA (Hons) degrees in Management and Economics from the Bosphorus University in Istanbul and was awarded the Chartered Financial
Analyst (CFA) designation in 2001.
Appendix
22
Profiles of Professionals
Alina Chiew, CFA
Managing Director; Head of Greater China Equity – Hong Kong
Alina manages Goldman Sachs Asset Management (GSAM) Equity Strategies in Greater China, a role she assumed in Hong Kong in 2010. She joined Goldman Sachs
in Shanghai in 2006 as an executive director in GSAM and assumed the role of chief representative for the Goldman Sachs Shanghai representative office in 2007. Alina
was named managing director in 2009. Prior to joining the firm, Alina was head of research at CITIC Frontier China Research in Shanghai from 2004 to 2006. Before
that, she was head of Singapore Research and a member of the Asian Banks team at Morgan Stanley from 2000 to 2004. From 1995 to 2000, she worked as an equity
analyst at Merrill Lynch and Crosby Research, where she covered Malaysian financial institutions. Alina also worked at the Central Bank of Malaysia in the Regulation
Department from 1990 to 1995, focusing primarily on banking policy formulation.
Hiren Dasani, CFA
Executive Director; Head of India Equity Research Team – Mumbai
Hiren is the head of the GSAM India Equity Research team and lead portfolio manager of GSAM’s India Onshore Equity strategy. He also has primary research
responsibility for the Financials sector within India. Hiren joined the GSAM India Equity Research team in January 2007 from SSKI Securities, where he spent a year
working as a sell-side Research Analyst covering the Indian banking and Financial Services sector. Prior to that, he spent a year at Prudential ICICI as a Credit and
Economy Analyst and Assistant Fixed Income Fund Manager, and three years at UTI Bank in Corporate Credit. Prior to attending business school, he worked at Dorf
Ketal Chemicals, a specialist chemical company, for two years. Hiren received a PGDM in Finance and Marketing from the Indian Institute of Management, Kozhikode in
2001 and a Bachelor of Engineering (Chemical) from the M.S. University of Baroda in 1997. He was awarded the Chartered Financial Analyst (CFA) designation in 2008.
Luke Barrs, CFA
Executive Director; Fundamental Equity Client Portfolio Management – London
Luke Barrs is an Emerging Markets specialist at Goldman Sachs Asset Management. In this role he is focused on helping clients gain appropriate access to emerging
markets, as well as assisting with their strategic asset allocation decision making process. As part of his role, Luke worked closely with Jim O’Neill – creator of the BRIC,
N-11 and Growth Markets concepts – and the Office of the Chairman within GSAM, helping launch GSAM's Growth Markets and N-11 Equity strategies. Luke continues
to act as client portfolio manager in GSAM's Fundamental Equity team, responsible for their Global Emerging Markets, N-11, India and Income related equity strategies.
Prior to joining Goldman Sachs Asset Management he received a first-class B.A. (Hons) in Economics & Management from Exeter College, University of Oxford. He was
awarded the Chartered Financial Analyst (CFA) designation in 2013.
Appendix
23
Additional Notes
THIS MATERIAL DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION WHERE OR TO ANY PERSON TO WHOM IT WOULD BE UNAUTHORIZED OR UNLAWFUL TO DO
SO.
Prospective investors should inform themselves as to any applicable legal requirements and taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might
be relevant.
This document has been issued by Goldman Sachs International, authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Offering Documents
This material is provided at your request for informational purposes only and does not constitute a solicitation in any jurisdiction in which such a solicitation is unlawful or to any person to whom it is unlawful.
It only contains selected information with regards to the fund and does not constitute an offer to buy shares in the fund. Prior to an investment, prospective investors should carefully read the latest Key
Investor Information Document (KIID) as well as the offering documentation, including but not limited to the fund’s prospectus which contains inter alia a comprehensive disclosure of applicable risks. The
relevant articles of association, prospectus, supplement, KIID and latest annual/semi-annual report are available free of charge from the fund’s paying and information agent and/or from your financial
adviser.
Distribution of Shares
Shares of the fund may not be registered for public distribution in a number of jurisdictions (including but not limited to any Latin American, African or Asian countries). Therefore, the shares of the fund must
not be marketed or offered in or to residents of any such jurisdictions unless such marketing or offering is made in compliance with applicable exemptions for the private placement of collective investment
schemes and other applicable jurisdictional rules and regulations.
Investment Advice and Potential Loss
Financial advisers generally suggest a diversified portfolio of investments. The fund described herein does not represent a diversified investment by itself. This material must not be construed as investment
or tax advice. Prospective investors should consult their financial and tax adviser before investing in order to determine whether an investment would be suitable for them.
An investor should only invest if he/she has the necessary financial resources to bear a complete loss of this investment.
Swing Pricing
Please note that the fund operates a swing pricing policy. Investors should be aware that from time to time this may result in the fund performing differently compared to the reference benchmark based
solely on the effect of swing pricing rather than price developments of underlying instruments.
The strategy may include the use of derivatives. Derivatives often involve a high degree of financial risk because a relatively small movement in the price of the underlying security or benchmark may result
in a disproportionately large movement in the price of the derivative and are not suitable for all investors. No representation regarding the suitability of these instruments and strategies for a particular
investor is made.
Emerging markets securities may be less liquid and more volatile and are subject to a number of additional risks, including but not limited to currency fluctuations and political instability.
Portfolio holdings may not be representative of current or future investments. The securities discussed do not represent all of the portfolio's holdings and may represent only a small percentage of the
strategy’s portfolio holdings. Future portfolio holdings may not be profitable.
Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss
of principal may occur.
Appendix
24
Additional Notes (cont’d)
Appendix
Economic and market forecasts presented herein reflect our judgment as of the date of this presentation and are subject to change without notice. These forecasts do not take into account the specific
investment objectives, restrictions, tax and financial situation or other needs of any specific client. Actual data will vary and may not be reflected here. These forecasts are subject to high levels of
uncertainty that may affect actual performance. Accordingly, these forecasts should be viewed as merely representative of a broad range of possible outcomes. These forecasts are estimated, based on
assumptions, and are subject to significant revision and may change materially as economic and market conditions change. Goldman Sachs has no obligation to provide updates or changes to these
forecasts. Case studies and examples are for illustrative purposes only.
Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. We have relied upon and assumed without independent
verification, the accuracy and completeness of all information available from public sources.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by GSAM to buy, sell, or hold any security. Views and opinions are current as of the date of this
presentation and may be subject to change, they should not be construed as investment advice
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.
This material has been prepared by GSAM and is not financial research nor a product of Goldman Sachs Global Investment Research (GIR). It was not prepared in compliance with applicable provisions of
law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. The views and opinions expressed may differ from
those of Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their financial advisors before buying or
selling any securities. This information may not be current and GSAM has no obligation to provide any updates or changes.
A Goldman Sachs affiliate (the “Manager”) relies (or expects to rely) on Rule 4.13(a)(3) under the U.S. Commodity Exchange Act, as amended (the “Rule 4.13(a)(3) Exemption”) with respect to the GS
Growth & Emerging Markets Broad Equity portfolio (the “Fund”) based on satisfaction of the criteria for the Rule 4.13(a)(3) Exemption set forth therein. Therefore, the Manager is not required to deliver
certain CFTC-compliant disclosure documents and certified annual reports to investors in the Fund. In order to rely on the Rule 4.13(a)(3) Exemption, the Fund may only engage in a limited amount of
commodity interest transactions, which includes transactions involving futures contracts and swaps.
Index Benchmarks
Indices are unmanaged. The figures for the index reflect the reinvestment of all income or dividends, as applicable, but do not reflect the deduction of any fees or expenses which would reduce returns.
Investors cannot invest directly in indices.
The indices referenced herein have been selected because they are well known, easily recognized by investors, and reflect those indices that the Investment Manager believes, in part based on industry
practice, provide a suitable benchmark against which to evaluate the investment or broader market described herein. The exclusion of “failed” or closed hedge funds may mean that each index overstates
the performance of hedge funds generally.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve
similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio
characteristics may deviate from those of the benchmark.
Confidentiality
No part of this material may, without GSAM’s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer,
director, or authorized agent of the recipient.
© 2015 Goldman Sachs. All rights reserved. Compliance code: 14771-TMPL-09/2015-72157 36471-TMPL-03/2016-195715
25
Goldman Sachs Business Principles
1. Our clients’ interests always come first. Our experience shows that if we
serve our clients well, our own success will follow.
2. Our assets are our people, capital and reputation. If any of these is ever
diminished, the last is the most difficult to restore. We are dedicated to
complying fully with the letter and spirit of the laws, rules and ethical
principles that govern us. Our continued success depends upon
unswerving adherence to this standard.
3. Our goal is to provide superior returns to our shareholders. Profitability
is critical to achieving superior returns, building our capital, and
attracting and keeping our best people. Significant employee stock
ownership aligns the interests of our employees and our shareholders.
4. We take great pride in the professional quality of our work. We have an
uncompromising determination to achieve excellence in everything we
undertake. Though we may be involved in a wide variety and heavy
volume of activity, we would, if it came to a choice, rather be best than
biggest.
5. We stress creativity and imagination in everything we do. While
recognizing that the old way may still be the best way, we constantly
strive to find a better solution to a client’s problems. We pride ourselves
on having pioneered many of the practices and techniques that have
become standard in the industry.
6. We make an unusual effort to identify and recruit the very best person
for every job. Although our activities are measured in billions of dollars,
we select our people one by one. In a service business, we know that
without the best people, we cannot be the best firm.
7. We offer our people the opportunity to move ahead more rapidly than is
possible at most other places. Advancement depends on merit and we
have yet to find the limits to the responsibility our best people are able to
assume. For us to be successful, our men and women must reflect the
diversity of the communities and cultures in which we operate. That
means we must attract, retain and motivate people from many
backgrounds and perspectives. Being diverse is not optional; it is what
we must be.
8. We stress teamwork in everything we do. While individual creativity is
always encouraged, we have found that team effort often produces the
best results. We have no room for those who put their personal interests
ahead of the interests of the Firm and its clients.
9. The dedication of our people to the Firm and the intense effort they give
their jobs are greater than one finds in most other organizations. We
think that this is an important part of our success.
10. We consider our size an asset that we try hard to preserve. We want to
be big enough to undertake the largest project that any of our clients
could contemplate, yet small enough to maintain the loyalty, the
intimacy and the esprit de corps that we all treasure and that contribute
greatly to our success.
11. We constantly strive to anticipate the rapidly changing needs of our
clients and to develop new services to meet those needs. We know that
the world of finance will not stand still and that complacency can lead to
extinction.
12. We regularly receive confidential information as part of our normal client
relationships. To breach a confidence or to use confidential information
improperly or carelessly would be unthinkable.
13. Our business is highly competitive, and we aggressively seek to expand
our client relationships. However, we must always be fair competitors
and must never denigrate other firms.
14. Integrity and honesty are at the heart of our business. We expect our
people to maintain high ethical standards in everything they do, both in
their work for the firm and in their personal lives.
Appendix