DBRS today confirmed all ratings for the Wall Street investment bank Goldman Sachs Group, Inc. following the news that it has joined with several other firms to invest US$3 billion in Goldman’s beaten down Global Equity Opportunities Fund.

The fund is a long/short equity strategy fund managed by its asset management division, Goldman Sachs Asset Management. “With a net asset value of US$3.6 billion prior to this investment, the GEO fund has suffered significant losses in its net asset value last week as a result of the current market turmoil that drove adverse patterns in correlations, volatility and the volume of trades,” DBRS noted.

According to Goldman Sachs, the motivation behind the investment was to invest in the GEO fund at what it perceives as an attractive price, given the decline in NAV, and to provide some support for existing investors in the GEO fund by alleviating pressure to further reduce leverage in the fund.

In confirming the rating, DBRS recognizes that Goldman’s contribution to the investment of approximately US$2 billion is very manageable relative to its total assets of US$943 billion and total shareholders’ equity of US$38.5 billion as of May, and pre-tax earnings of US$3.4 billion in the second quarter.

“Given Goldman’s skillful management of risk, DBRS anticipates that the company has carefully weighed the opportunities for gain against the risk of loss, within the same framework used to evaluate other investment decisions. Accordingly, DBRS does not perceive that the transaction by itself adds significantly more risk than other investments the company might make,” it said.

DBRS also recognizes that this investment does raise the question of the extent to which Goldman would support other GSAM funds that may experience stress; and the implication that this poses a contingency risk for the company, which may have a bearing on its rating in the future, if similar actions were repeated.

DBRS said it views this contingency risk as limited, given the circumstances of the investment in the GEO fund. “The company stressed that it was not establishing a precedent. Moreover, it did not provide support to two other GSAM funds that have also had losses, the Global Alpha fund and the North American Equity Opportunities Fund,” it noted. “Some unique aspects of this investment suggest that Goldman might contemplate such actions only under a limited set of circumstances.”

The rating agency said that it would be concerned about the extent of implied support, if Goldman were to take similar actions in a situation that does not offer an appropriate potential return for the risk taken.

It added that Goldman’s ratings are underpinned by its formidable global investment banking franchise, its powerful diversified global fixed-income and equities businesses, as well as its strong financial profile and skillful risk management. Goldman also has a substantial earnings cushion that would enable it to absorb significant adverse events out of current earnings, it said. DBRS views Goldman’s liquidity as strong. Nevertheless, it said it will continue to monitor how the current turmoil in financial markets affects Goldman’s liquidity.