Denis Coleman: About 64.6%.
David Solomon: Okay. So putting it in perspective, I think it’s important to highlight that we don’t think the things that we’re highlighting continue in perpetuity. We’re trying to narrow the focus and when we look at our Global Banking & Markets business and our Asset & Wealth Management platform, we think we have the right target. Now back to your point, Steve, about competition. The competition for talent, especially the best talent, remains very, very strong. And so we think we’ve got a very, very good talent ecosystem. I feel good about the hiring we’re doing. I’d just highlight that for our analyst jobs out of university, we had 260,000 applications for approximately 2,600 jobs. There are over 1 million applications for employment at Goldman Sachs last year.
Very, very aspirational and desirous place to work, but the competition for talent remains high. And so we’ll strike the right balance and making an investment in our talent. You heard Denis talk about some of our efficiencies and the fact that the efficiencies allow us to make a reinvestment in some of our best talent. We feel good about where we are, but we also believe that as we continue to execute on our strategy, which narrows our focus and keeps us focused on our two core businesses of Global Banking & Markets and Asset & Wealth Management, that the efficiency ratio target that we’re hiring — that we’re highlighting over the next few years is a reasonable target.
Steven Chubak: That’s great color. And just for my follow-up, a broader question on the sponsor outlook. Alts fundraising, it’s continued at a healthy clip, but PE is facing numerous headwinds, whether it’s the LP denominator effect, higher rates and just slower realization activity in general. I was hoping you could speak to the broader outlook for the sponsor business and the implications for both the sponsor booking activity as well as the alternative asset management business.
David Solomon: Sure. So that broadly defined sponsor community, Steven, which really is the broad alternatives world, private capital world, the first thing I’d just say is we believe strongly that there’s still a very, very long-term secular growth trend that is intact and will continue. I think there’s some very, very interesting macro dynamics. I believe there’s over $70 trillion of assets held by baby boomers that sometime in the next 20 years either will be passed on to a younger generation for aggressive investment, will go to taxes or will go to charitable foundations, by the way, charitable foundations who also invest. So there’s a very, very strong dynamic of good flows and a shift, especially given the size of the public markets into private asset classes.
And so we believe that’s firmly intact. There’s no question that the capital raising environment is more muted than it’s been. I would say it was extraordinarily robust in 2020 and 2021 and very, very robust in an environment where monetary policy was incredibly accommodated. But there’s no question that all of this investing can be successful as new vintages and a new reset environment are opened up even if rates are higher and they operate higher. The one thing I know about the sponsor community is they generally make money by selling assets, and the sponsor community owns an enormous portfolio of businesses, and they also make money when they buy new assets. They obviously have to buy new assets at different valuations with different financing costs now.
And what I’d say is for the last six quarters, the last 1.5 years, that community has been very quiet. In our dialogue, they are starting to see more interesting opportunities. And I would expect in the next 12 to 24 months, the level of activity in the sponsor community will increase again, both in terms of sales. It’s one of the reasons why I’m optimistic on capital markets and our advisory activities look forward over the course of the next four to eight quarters but also in terms of new purchases. I’m not suggesting that it will go back to where it was in 2021. That would not be the norm, but if you look at kind of 10-year historical averages and the percentage of investment banking activity, the sponsor activity would make up, I would expect that you’ll see it go back to those averages.
And at the moment, we’re well below those averages at the current point in time.
Steven Chubak: Very helpful, David. Thanks for taking my questions.
Operator: Our next question comes from Brennan Hawken with UBS. Please go ahead.
Brennan Hawken: Good morning, David and Denis. Thanks for taking my questions I’d love to start on expenses and comp, and David, you just spoke a little to this when answering Steven’s question. But the comp ratio, we saw revenue growth broadly quarter-over-quarter and yet the comp ratio ticked up, which is rather unusual for Goldman. Denis, I know you layered in that there was nearly $300 million of severance year-to-date. Was some of that in the third quarter or was there any unusual items impacting the comp ratio? Or was this mostly just because of the competition for talent? Thanks.
Denis Coleman: So in terms of third quarter, it was very, very small. We previously disclosed $260 million of severance so there’s a small amount of severance in the quarter. We just think it’s important to continue to call that out and highlight it so you can track that over the course of the year. That obviously rolls into our overall ratio in terms of what we’re thinking for the full year. And we made the adjustment to the comp ratio in the third quarter based on what our expectations are for year-end performance as well as what we expect to pay our people. And we’re looking in top composition this being mindful that we continue to pay for performance, but also recognizing, in particular, across our core businesses, we have leading market shares in Global Banking & Markets, record year-to-date financing activity, record management fees year-to-date, record private banking and lending activities year-to-date.
And these are the bedrocks of our business for the foreseeable future. And we think it’s important that we continue to recognize and retain the talent associated with those businesses that are going to unlock our mid-teens returns in the future.
Brennan Hawken: Okay. Thanks for that, Denis. And then when you’re thinking about — thanks for all the color on those CRE and the exposures. When you’re thinking about these historical principal investments that you’re intending to continue to sell by the end of next year, what portion of those are CRE or CRE-related? Is it possible to give any color around the assets that you’re looking to sell and how exposed they are to CRE or other sectors?
Denis Coleman: Sure. So I made a comment earlier. If you look at aggregate CRE-related on-balance sheet investments and you look across asset classes like loans, debt securities, equity securities, and remaining exposure of equity in our CIE portfolio, that, in aggregate, now stands at a little bit under $10 billion, $9.7 billion and down already $5 billion year-to-date. There are portions of some of those exposures that relate to our firm-wide activities, our CRA obligations and some co-invest exposures. If you look at the — in aggregate, about 43% of the CRE on-balance sheet investments is HPI, and that’s what we’re looking to sell down over time.
Brennan Hawken: Great. Thanks for that color.
Operator: We’ll move to our next question from Mike Mayo with Wells Fargo. Please go ahead.
