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Goldman to Buy DeAWM Stable Value Unit

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On Wednesday, Goldman Sachs Asset Management (GSAM), a wing of The Goldman Sachs Group Inc. (GS - Free Report) , announced an agreement to acquire the stable value business from Germany-based Deutsche Asset & Wealth Management (DeAWM) with total assets under supervision of $21.6 billion as of Jun 30, 2013. DeAWM is a part of Deutsche Bank AG (DB - Free Report) .

Terms of the deal were not disclosed. The agreement, which follows GSAM’s intention to set up a new stable value collective trust as announced in Jul 2013, is expected to close in the first quarter of 2014. Moreover, the transaction is subject to certain customary conditions.

DeAWM, one of the world’s leading investment organizations, has $1.2 trillion (€946 billion) of assets under management as of Jun 30, 2013. The firm focuses in providing traditional and alternative investments across all major asset classes. It also serves with customized wealth management solutions and private banking services to high-net-worth individuals and family offices.

Among the various savings investment options available, “stable value” has been accredited as the most acceptable investment plan among millions of people, who are on the verge of retirement.

Among Goldman’s business segments, Investment Management includes management and other fees related to the company’s assets that include Goldman Sachs Asset Management, Private Wealth Management and management businesses including the company’s merchant banking funds. This segment contributed approximately 14% of the net revenues earned by the company in the first half of 2013.

The acquisition of DeAWM will help Goldman gain significant market share in the defined contribution investment-only business.  Moreover, the bank would be able to prosper in this business and provide more investment plans to help retired people capitalize on their hard earned savings. Notably, GSAM manages over $55 billion in defined contribution mandates, which includes more than $34 billion in stable value assets under supervision.

On the other hand, the completion of the deal will furnish DeAWM with more capital. Therefore, the amount will be redeployed by the firm in enhancing its range of investment solutions across fixed income, equity and alternative asset classes.

This deal gives Goldman full opportunity to leverage its strong corporate trust market reputation with DeAWM’s experience and proficiency in inventive stable value solutions, which would offer enhanced investment options to its clients. Last year, Goldman also acquired a Vermont-based stable value investment firm – Dwight Asset Management Company from Old Mutual Asset Management (OMAM), thereby enhancing its business.

Goldman currently carries a Zacks Rank #3 (Hold). Some better performing banks include BankUnited, Inc. (BKU - Free Report) and Capital One Financial Corp. (COF - Free Report) with a Zacks Rank #2 (Buy).

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