Goldman to Sell Stakes In an Investment App -- WSJ
September 20 2018 - 3:02AM
Dow Jones News
By Liz Hoffman
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 20, 2018).
Goldman Sachs Group Inc. is nearing a deal to spin off its
three-year-old app that sells complex investment products, the
bank's latest bid to profit from its internal technology.
JPMorgan Chase & Co., Barclays PLC, HSBC Holdings PLC,
Credit Suisse Group AG, Wells Fargo & Co. and insurer
Prudential Financial Inc. are in advanced talks with Goldman to
take stakes in the business, called Simon, people familiar with the
matter said. The deal being discussed would value Simon at roughly
$100 million and is likely to be finalized in the coming weeks, the
people said.
After decades of closely guarding its technology, Goldman has
begun in recent years to open up its software to clients and
competitors. It has started licensing out its trading and
risk-management system, known as SecDB, and has also spun out
internal chat tools and email apps into independent companies whose
products are sold across Wall Street.
Simon connects banks looking to sell investment products with
retail brokers looking to buy them. It focuses on structured notes,
which pay investors an upfront sum in return for a future payout
tied to the performance of assets such as the S&P 500 or oil
prices.
Structured notes, particularly those linked to stock indexes,
have become a more popular alternative to bonds in recent years as
interest rates stay low and the stock market chugs higher. But
concerns remain about their complexity, and regulators in recent
years wrung fines from Bank of America Corp., UBS Group AG and
other brokerages after alleging they sold notes to investors who
didn't fully understand the risks.
About $55 billion worth of structured notes were sold in the
U.S. last year, up from $37 billion in 2016, according to mtn-i, a
London-based data provider.
Morgan Stanley and Bank of America announced in July that they
were backing a competitor called Luma. Halo Investing, a
financial-technology startup, also has a rival platform.
Simon -- an acronym for Structured Investment Marketplace and
Online Network -- was originally developed as a conduit between
Goldman's securities desk and the firm's private bankers, who
bought Goldman-issued notes on behalf of wealthy clients. The bank
opened it up to outside firms in 2015 and has enrolled thousands of
brokers at firms including Raymond James Financial Inc.
Rival banks were slow to sign on, which in part spurred Goldman
to seek a spinoff. The new investors, plus Goldman itself, account
for about two-thirds of the U.S. structured note market.
The Wall Street Journal reported last year that Goldman was
looking to sell a stake in Simon. The $100 million valuation is in
part a bet that Simon can expand beyond structured notes into
annuities, market-linked certificates of deposit and potentially
exchange-traded funds, people familiar with the matter said.
Under the deal being finalized, outside investors would put more
than $50 million into Simon, the people said. Goldman will retain a
minority stake, and the team that has overseen Simon since its 2015
launch are leaving to run it, the people said.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
September 20, 2018 02:47 ET (06:47 GMT)
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