By Liz Moyer
Goldman Sachs Group Inc. (GS) is reportedly in talks to sell its
hedge fund administration business to State Street Corp. (STT) as
the firm refocuses its activities amid a slowdown in revenue.
Preliminary talks were reported earlier this year by HFMWeek.
The Financial Times reported on Sunday that the discussions had
advanced to a late stage. Spokesmen for Goldman Sachs and State
Street declined to comment.
A deal between the two banks would create the largest provider
in the hedge fund market, according to HFMWeek. State Street has
$506 billion of hedge-fund assets under administration as of the
end of March, while Goldman has $200 billion.
Hedge fund administration is a relatively mundane
behind-the-scenes Wall Street activity, including tax reporting and
accounting. Outsourcing frees up time for hedge fund managers to
concentrate on their own business. In addition, hedge funds are
under pressure to strengthen risk management and compliance.
State Street specializes in providing such services to
institutional investors, and hedge funds have been a major source
of growth over the years. The company services 21% of the $2
trillion hedge fund market, according to a State Street investor
presentation earlier this year.
Goldman, meanwhile, has been reining in costs and focusing on
its core trading, investment banking, and asset-management
businesses.
The Wall Street firm recently has made some small purchases,
including Ariel Reinsurance. But it has also moved to spin off its
REDI Technolgies electronic trading software group by courting
outside investments from banks. And it has been paring down a
sizable investment portfolio, selling $1.2 billion of its stake in
pipeline giant Kinder Morgan last week and $2.3 billion of its
stake in Industrial & Commercial Bank of China Ltd. in
April.
Write to Liz Moyer at liz.moyer@dowjones.com