Goldman Sachs at Deutsche Bank Conference Notes

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Gary Cohn – President & Chief Operating Officer

Capital markets have started to re-open

“Moving to Equity Underwriting. Capital markets have started to re-open a bit after a period of substantially lower activity. We remain positive on the long-term outlook for our equity underwriting franchise. If markets continue to be relatively stable we expect to see more client demand in equity capital markets.”

Seeing more electronification in FICC

“While electronification has been unfolding in equities for some time, we have also seen an electronic evolution across certain FICC products with regulation helping to accelerate this shift. In the future, we expect fewer voice trades and more automatic pricing and execution. This slide shows the growth in electronic volumes across a variety of products with higher growth rates in fixed income products where electronic trading continues to evolve and lower volume growth in more mature electronic markets.”

Two constituencies: shareholders and employees

“We feel like it’s our obligation as a management team to run the firm as efficiently as we can, understanding we have two constituencies. We have a shareholder base where our job is to optimize returns for our shareholders, but understand we’ve got a human capital base, our property, plant and equipment is our human capital. And we have to attract and retain the best human capital in the world to drive the organization to be able to facilitate our client’s needs.”

Active vs. passive debate is cyclical

“I think the electronic trading is much more secular. Many of the products that go electronic probably stay electronic and there is no reason for them not to stay electronic.

The passive – the active to passive to me could be much more – much, much more cyclical. Because if we ended up in a world where you saw active managers outperforming index by many, many basis points, net of fees, you would clearly see a migration back into those active portfolio managers.

One of my part time jobs is I run a couple endowments, and we look at performance net of fees and we’ll tend to go where the performance is. And it’s not that the endowment committees say, look, we’re only going to passive, we’re going to go to where we think we get the best risk-adjusted returns net of fees for the longer period of time.

So, I do believe that that is much more cyclical. And you will see active management at some point potentially outperform index.”

There will always be some voice trading

“There is always going to be some equilibrium. I mean even in the equities market where Harvey and I have both lived through the migration from 0% electronic to 90% plus electronic, we still have a voice overlay component where there is certain transactions that don’t work in the electronic system. Whether they be large blocks, whether they be swaps, derivatives, certain type of transactions that don’t work in the electronic system or the algorithmic system. So I do believe there will be an equilibrium between voice and digital.”

Harvey Schwartz – Executive Vice President & Chief Financial Officer