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Fidelity Squeezes Out Goldman Sachs on the Short Sell

May 16, 2019

Just as Goldman Sachs is reportedly getting ready to expand its wealth management offerings, it’s also getting squeezed out of part of its lending business, according to news reports.

Fidelity Investments has opted to bring its stock-lending business, primarily used by short-sellers, in-house, taking out Goldman as the middleman, according to Bloomberg, which cites a March 29 regulatory filing.

Goldman used to rake in about 10% of the revenue Fidelity took from firms borrowing stocks to sell short, the news service writes.

Fidelity plans to transfer the anticipated savings from the move to increase returns in funds that lend securities, especially index tracking funds that hold thousands of stocks, according to Bloomberg. With Goldman as the broker, the funds collected 90% of the revenue from the lending, but will now earn at least 90.1% of the revenue, according to Fidelity, Bloomberg writes.

Overall, securities lenders make about $9.9 billion annually, according to Bloomberg, which cites EquiLend, a securities-finance trading and clearing service owned by global financial firms.

And Goldman Sachs Bank USA is one of the largest lending agents for mutual funds and insurers, counting among its clients Putnam Investments, Russell Investments and Charles Schwab, the news service writes.

A representative for the bank declined comment to Bloomberg.

Earlier this month, reports emerged that Goldman was close to acquiring the independent RIA firm United Capital Financial Partners for $750 million.

The move could add up to about 220 United Capital advisors and $24 billion in client assets to Goldman’s 450 private bankers managing $480 billion.

By Alex Padalka
  • To read the Bloomberg article cited in this story, click here.