Goldman Sachs Asset Management (GSAM), a wing of
The Goldman Sachs Group, Inc
), has been sued by a Netherlands-based pension fund -
Pensioenfonds Vervoer - for alleged mismanagement of funds. The
Dutch fund has filed two claims in London's High Court, amounting
to €240 million ($300 million).
According to the Pensioenfonds, in its capacity as the fiduciary
manager, GSAM indulged in several inapt investments during the peak
of the 2008 economic crisis. Due to this, the pension fund had to
bear huge losses.
The first claim by Pensioenfonds relates to investments made in the
perilous sub-prime debt and the second one accuses Goldman of
taking a long time to give a green signal for investing in global
high-yield bonds. The fiduciary manager's actions led to the
deletion of millions of euros from Pensioenfonds' portfolios.
Consequently, Goldman was dismissed in 2010 and
Northern Trust Corporation
) started managing the fund's investment strategies in the interim
period. Finally in 2011, Rotterdam-based asset management firm -
Robeco - was hired to fill the void left by the dismissal of
Pensioenfonds has been struggling to cope up with the after-effects
of the financial downturn as it cleaned up billions of euros from
its capital. Pensioenfonds Vervoer is finding it difficult to meet
the liquidity requirements of the Dutch central bank in the
backdrop of persistent low-interest environment and volatile equity
As per the Dutch central bank, all the banks are required to
maintain 100% solvency level and the minimum funding requirement of
105%. Currently, the liquidity requirements at Pensioenfonds are
lingering below the 100% mark. The near-term outlook remains
cautious owing to the daunting macroeconomic issues. However, the
Dutch government's permission to allow the usage of higher interest
rates for long-term calculations has been effective in delaying
The Dutch crisis for Goldman is far from over. A number of pension
funds across the Netherlands, which suffered due to the poor
performance of the GSAM, have resorted to litigation.
Earlier this year, Goldman was dragged into court by the ABP
pension fund. The fund claimed that GSAM had provided it with
misleading statements regarding the risks involved in the mortgage
bonds, causing it to bear a sizeable loss during 2008.
Dubious practices have maligned Goldman's reputation, and
litigation costs are bound to hurt its financials in the long run.
Though Goldman claims its diligence in executing responsibilities
on behalf of its customers, the circumstances reflect a different
Currently, Goldman retains its Zacks #3 Rank, which translates into
a short-term Hold rating. Considering the fundamentals, we also
maintain our long-term Neutral recommendation on the stock.
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