Goldman Sachs has told staff at its asset management division GSAM to tighten their belts, amid outflows and poor performance from some of its largest funds.
Executives have issued an edict that GSAM's 2,000 employees must curtail spending, including a ban on all travel that is not associated with meeting clients and winning new business.
GSAM's flagship bond fund is languishing in the bottom one-fifth of its class on a one- and three-year view of its performance, and investors have pulled money for 15 consecutive months from GSAM's US mutual funds, according to Morningstar data.
The malaise reflects wider pressures on the industry, where actively managed funds are losing market share to low-cost index trackers. It also complicates Goldman's efforts to build a larger asset management business to balance its traditional investment banking and trading arms, where profitability is being squeezed.
Other asset managers have also been cutting costs this year because of outflows from active funds, pressure on fees and volatile markets. BlackRock, Franklin Templeton and Pimco have all laid off staff.
GSAM is continuing to grow assets under management overall, topping $900bn in the first quarter, up by $100bn in a year.
However, its lucrative mutual fund franchise has suffered from unfavourable comparisons to its peers, particularly at the strategic income bond fund, an "unconstrained" fixed income fund that has broad latitude to make bets across the bond market.
The fund is down 2.5 per cent in the past year, when the bond market as a whole has gone up 6.0 per cent, and the fund's three-year record is now negative. Customers have pulled $12bn from the fund in 18 consecutive months of outflows, halving it in size.