Goldman Sachs Group Inc. and Morgan Stanley have invested almost $20 billion of their own money in private-equity, private-debt, real estate and hedge funds, meaning they may each have to cut those stakes by more than 60% to comply with the so-called Volcker Rule.
Goldman Sachs had $15.4 billion in such investments at June 30, and Morgan Stanley had $4.22 billion, the New York companies said in regulatory filings Monday.
The Volcker Rule limits a bank's total investments in such funds to 3% of its Tier 1 capital. That means Goldman Sachs and Morgan Stanley would have to reduce their stakes to $2.1 billion and $1.6 billion, respectively, if the rule were enforced today. U.S. banks may have as long as 12 years to cut their stakes. Goldman Sachs said in the filing that "substantially all" of the underlying assets of the funds will be liquidated within 10 years. Morgan Stanley said 46% of the fair value of its private-equity funds and 49% of its real estate funds are likely to be liquidated in the next 10 years.
