(Bloomberg) -- Goldman Sachs Group Inc.’s fourth-quarter results got an unusual boost from a type of investment the firm has been trying to wind down.
A $472 million haul in “historical principal investments” included a big gain in equity bets tied to the firm’s own balance sheet, the company said in a presentation Wednesday. The revenue source is a legacy of direct investments Goldman makes with its own money, which have largely been consolidated onto the books of its asset-management unit.
The bank has been gradually shifting away from using its own balance sheet to make those types of bets after many investors complained that they made the company’s earnings too wild a roller coaster. It’s now chasing a more stable flow of income from fee-based businesses.
Such balance-sheet investments have been a feature of Goldman’s results for years. But they’re not well-loved by investors, who largely spurn the results as too tough to predict.
Still, some of these old bets are rewarding Goldman handsomely. In particular, the bank cited “significantly higher mark-to-market net gains from investments in public equities” as a reason for the jump in the fourth quarter.
Banks across Wall Street profited from a booming equities market, with rising volatility around the US election bringing more client activity to trading desks. However, it’s less common for banks to still be netting profits thanks to their own bets.
Goldman’s revenue from equity investments in the unit totaled $729 million, compared with the $284 million analysts had predicted. At $264 million, debt investment revenue was 10% higher than expected.
The bank also said historical principal investments declined by 42% to $9.4 billion over the year.
--With assistance from Sridhar Natarajan.
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