GOLDMAN Sachs Group Inc, the most profitable securities firm, reported an increase in so-called Level 3 Assets during the first quarter, exceeding those at Morgan Stanley and Lehman Brothers Holdings Inc
Goldman's share of Level 3 assets, the firm's hardest-to-value, surged 39 percent to US$96.4 billion at the end of February from US$69.2 billion in November, according to a filing with the US Securities and Exchange Commission yesterday. The ratio of Level 3 to total assets rose to 8.1 percent from 6.2 percent, said Bloomberg News.
While many subprime-related assets that lost almost 100 percent of their value since July were categorized in Level 3, other holdings such as private-equity stakes, real estate and rarely traded corporate debt are also included because market prices for them are not available.
More assets have become difficult to value in the last three months as investors shunned a wider array of credit, freezing the trading of securities.
Morgan Stanley's Level 3 assets rose 6.1 percent to US$78.2 billion last quarter, the firm said yesterday in an SEC filing. Lehman, which also filed a report with the agency yesterday, said its Level 3 holdings rose 1.3 percent to US$42.5 billion. All three firms are based in New York.
The harder-to-value securities made up 7.2 percent of Morgan Stanley's total assets at the end of February, up from seven percent three months earlier. Lehman's ratio declined to 5.4 percent from 6.1 percent as total assets grew faster.
In the fourth quarter of last year, Bear Stearns Cos. ranked No. 1 among the four firms with 7.1 percent of its assets comprising of Level 3. Bear Stearns did not publish first-quarter results this year after agreeing to be sold to JPMorgan Chase & Co last month.
Stripping out stakes owned by others, Goldman's "exposure" to Level 3 assets was US$82.3 billion.