And so we’ll continue to focus.
Ryan Kenny: Great. Thank you.
Operator: We’ll go next to Dan Fannon with Jefferies.
Daniel Fannon: Thanks. Good morning. As you think about your efficiency targets, what’s a reasonable level of growth for non-comp expenses as we, excluding, obviously, all the one-timers this year? And maybe what the areas of investment are or priorities when you think about 2024?
Denis Coleman: Thanks, Dan. So the efficiency ratio is something we are laser focused on. We continue to orient the firm to drive towards our 60% target. You mentioned the impact of selected items. If you take the impact over the course of 2023, the efficiency ratio would have been more like 65%. That’s, obviously, not where we want it to be, but significantly better than the fully reported number. We have a number of initiatives across the firm to get after our non-compensation expense. We had a very structured process we implemented once we put out some of the efficiency targets at the end of last year, rigorously marking to market our business plan and our execution against it over the course of the year. There is a — we have a ton of different categories.
We’re in the process of reviewing each and every category of our non-compensation expense, benchmarking it, reviewing KPIs, thinking about our processes, incentive structures, governance, things that we can do to continue to drive that expense as efficiently as possible. We do see an impact of inflation across these activities, and it’s for that reason, that we need to implement the types of processes to mitigate those impacts and manage it as closely as possible. I think as we look into 2024, if you take a look at the disclosure round selected items, we don’t expect those types of activities to repeat, and we’ll be very, very — remain very, very focused on maintaining our overall non-comp expense spend. And the other component of the efficiency ratio is, obviously, compensation expense.
You saw that over the course of this year, we maintained our pay for performance orientation with respect to how we size that, and you should expect the same on the forward into 2024, that is obviously a performance-based and variable component of our overall expense. There are also a number of other items within our expense base that are variable. Our largest items, both compensation as well as transaction expenses, are variable. So we will have to see how the types of activities unfold into 2024 and what the mix of our activities are to, ultimately, determine where we land on an aggregate expense base and an efficiency ratio.
Daniel Fannon: Great. Thank you. And follow-up on Wealth Management, you disclosed 40% of the alternative inflows since 2019 have come from the wealth channel. Curious if that was consistent throughout that time period and whether you view that level of contribution as sustainable. And also just the economics to Goldman Sachs, how it differs between that 40% in wealth and the 60% externally. How does that — what’s the difference in revenue?
David Solomon: Well, at a high level, that comment is — looks over the past four years that we’ve grown our Asset Management business — Asset & Wealth Management business, and it highlights in the alternative raising over that period, this initial period of investment, what the mix has been between wealth, the institutional client base or other channels like third-party wealth, retail, et cetera. When you look at our strategy, Dan, we — if you go back 20 years, most of our fundraising for these activities came from our private wealth channel and the percentage of the money we managed was much higher than 40% from private wealth. So as we continue to invest in broad institutional partnerships in the pension community, the sovereign wealth community areas where historically we had not raised a lot of alternative funding, that percentage of wealth funding will probably decrease, but I’m not going to speculate exactly where it will go.
At scale, the economics associated with all these alternatives are extremely attractive. They’re attractive in the private wealth channel and they’re attractive in our institutional partnerships. But as I think you all know, they’re not exactly identical. And people that allocate or enter a partnership with you and allocate $10 billion definitely have a different economic proposition than somebody that’s giving you $50 million or $100 million. And that’s been consistent in the business for a long, long time. So we’re continuing to scale the business. We have real margin targets in the business. I think we’ve got lots of opportunities and we’re still in the early stages of using the platform of Goldman Sachs to cement and invest these broad distribution channels for the benefit of our scaled Asset & Wealth Management platform.
And I’m confident we’ll continue to make good progress.
Daniel Fannon: Great. Thank you.
Operator: Thank you. We’ll go next to Matt O’Connor with Deutsche Bank.
Matt O’Connor: Good morning. There’s, obviously, all the uncertainty on the capital rules as was discussed earlier. But just in the near-term, how do you think about capital allocation? You’re, obviously, continuing to lean into financing, which is capital-intensive, depending on how banking, and if banking comes back, that can consume capital. And then just touch on interest in bolt-on deals, and then obviously, anything on buybacks, which were pretty solid in ’23. Thank you.
David Solomon: I’ll start, and Denis, might add some comments. We’ve always said that when there’s activity to support our clients, that’s our primary focus on where we can allocate capital. We’ve increased the amount of capital allocated to our franchise — our client franchises over the course of the last five years. And I think one of the reasons why our big broad Global Banking & Markets franchise has performed on a relative basis in different environments the way it’s performed is we’ve been very, very focused on making sure we have the capital and the financial resources to serve our client base well. Where we see opportunities, we will continue to deploy capital there. That’s in our broad capital planning program. We do generate a lot of capital from earnings.
