Opalesque Industry Update – Europe’s biggest hedge fund, Lansdowne Partners, has confirmed its decision to sell its entire $850m stake in American investment bank Goldman Sachs. The move raises question about the prospect of the global banking sector, various media reports say.|
According to a report by the British newspaper The Independent, Lansdowne owns nearly one percent of the Wall Street bank’s equity. Lansdowne’s exposure in Goldman Sachs is equivalent to nearly 10%of its entire $10bn assets under management.
Others see the sale of at least 4.94 million Goldman shares as a further blow to the Wall Street Bank which saw its shares plunge to levels not seen since 2009 after results of second-quarter performance showed disappointing numbers.
Goldman Sachs reported a $1.09bn profit in the second quarter and announced a decision to cut up to 1,000 jobs worldwide.
What is significant with Lansdowne’s move is that the firm made a similar offloading decision at the height of the financial crisis in 2008 when it sold its shares ahead of the collapse of Lehman Brothers. The hedge fund is one of the top 20 investors in Goldman.
While the hedge fund’s decision to exit Goldman is due to the decline in the value of Goldman’s proprietary trading operations, many analysts hint that it also raises serious questions about the health of the global banking industry.
Banks’ proprietary trading operations are hit by new regulatory changes under the Volcker rule. Many investment banks have already disbanded their proprietary units.