Goldman Files for Six Bond ETFs as Its Retail Force Expands
Goldman Sachs Asset Management filed a preliminary prospectus for six exchange-traded funds on Friday, doubling the number of inexpensive bond ETFs it hopes to offer as it absorbs a new sales force of financial planners.
Goldman did not disclose details of a selling network for the funds, or of its internal costs, but analysts said the plan has the earmarks of a strategy aimed at making the investment bank and wealth manager a 360-degree provider to the masses.
“It looks like Goldman Sachs has gone full-Schwab,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, commenting on discount brokerage pioneer Charles Schwab & Co.’s expansion since its founding in the 1970s into wealth advisory and asset management products over the years.
“It’s all about having all of the products that are in demand right now and being able to service your wealth management clients with your in-house products. Everyone’s just sort of starting to copy the Schwab and Vanguard model.”
Goldman in April paid $750 million to buy United Capital Financial Advisers, a 90-office, 220-adviser financial planning rollup. A month earlier it bought Standard & Poor’s Investment Advisory Services, a model portfolio business.
A Goldman spokesman would not comment on whether the new products align with the blue-chip investment bank’s decision to expand its core wealth businesses beyond its small unit of brokers who service very wealthy individuals and their families.
Even before the United Capital deal, the private wealth unit that is part of the GSAM division attracted $17 billion of net “long-term fee-based” customer assets in 2017, equating to an average of about $4.5 million per broker. That’s “much higher than our large bank competitors,” former Goldman Chairman and Chief Executive Lloyd Blankfein said early last year as he was preparing to retire.
GSAM launched low-expense equity ETFs in 2015, and the new bond funds would stretch its fixed-income ETF menu to eleven funds.
The new ETFs do not break new sector ground, tracking indexes reflecting the “aggregate” U.S. bond market, the China market, the short-term (one-to-five year) and long-term (ten-plus years) investment grade corporate bond market and the total U.S. Treasury market, according to the company’s filing with the Securities and Exchange Commision.
Goldman, to be sure, distributes its broad array of investment management products through many third-party intermediaries, and will almost certainly continue to do so with the new ETFs.
In a detailed accounting of potential conflicts of interest, the prospectus does not mention sales of proprietary asset management products to its own retail customers.
It’s almost inevitable that GSAM, which has made a mark with some high-priced alternative investment products, will have very low expense ratios on the ETFS that will help it compete, analysts said.
“It would be hard to make an investment case to come to market with a nearly identical product that’s more expensive,” said Todd Rosenbluth, director of mutual fund and ETF research at CFRA. “There’s significant overlap, for example, in what you’d get in a [Goldman] aggregate bond fund compared with iShares or Vanguard.”
As for how much of an influence a small internal distribution force can have, some observers pointed to the billions of dollars that private bankers at J.P. Morgan have directed into the bank-run BetaBuilders-branded ETFs that it launched last summer.