Do Sovereign Wealth Funds Need Bankers for Deal Flow?


Sovereign funds are earning their keep as buyers of assets, competing against private equity funds for lucrative stakes in companies like New China Life and a U.K. mobile company. The competition for attractive, long-term, sustainable companies is fierce. In 2007, sovereign wealth funds owned about US$ 3.5 trillion in assets, and there were far fewer in number. Pre-2004, these public institutional investors were known by dealmakers on Wall Street but significantly unknown by the financial media and general public. In the past, wealth funds frequently procured the use of investment bankers for idea generation and deal flow (and still do today), but the relationship between banker and asset owner has evolved favoring the latter. The push and pull relationship continues to propagate; the needs of investment banking and deals remain, but the level of trust vacillates. In this story, we have selected Goldman Sachs to analyze for multiple reasons. First, Goldman typifies the ideal investment bank to many in the industry. The bank has a reputation for getting deals and getting paid massive amounts of money. Analyzing multiple sources of data, including our own, the investment bank year-to-date is the top fee generator in the area of mergers & acquisitions. Trailing behind is JP Morgan, Bank of America Merrill Lynch, Morgan Stanley, Deutsche Bank and Citi when it comes to fees and M&A.

Has Goldman Sachs investment banking lost out to competitors when it comes to dealing with sovereign funds?

Inside Goldman Sachs

Former Goldman Sachs co-Chair John Whitehead (passed away in 2015) wrote his 10 commandments. One of this commandments was “Important people like to deal with other important people. Are you one?”

This highlights the culture of Goldman Sachs. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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