By Liz Hoffman 

Goldman Sachs Group Inc. is nearing a deal to spin off its three-year-old app that sells complex investment products, the bank's latest bid to profit from its internal technology.

JPMorgan Chase & Co., Barclays PLC, HSBC Holdings PLC, Credit Suisse Group AG, Wells Fargo & Co. and insurer Prudential Financial Inc. are in advanced talks with Goldman to take stakes in the business, called Simon, people familiar with the matter said. The deal being discussed would value Simon at roughly $100 million and is likely to be finalized in the coming weeks, the people said.

After decades of closely guarding its technology, Goldman has begun in recent years to open up its software to clients and competitors. It has started licensing out its trading and risk-management system, known as SecDB, and has also spun out internal chat tools and email apps into independent companies whose products are sold across Wall Street.

Simon connects banks looking to sell investment products with retail brokers looking to buy them. It focuses on structured notes, which pay investors an upfront sum and in return for a future payout tied to the performance of assets such as the S&P 500 or oil prices.

Structured notes, particularly those linked to stock indexes, have become a more popular alternative to bonds in recent years as interest rates stay low and the stock market chugs higher. But concerns remain about their complexity, and regulators in recent years wrung fines from Bank of America Corp., UBS Group AG and other brokerages after alleging they sold notes to investors who didn't fully understand the risks.

About $55 billion worth of structured notes were sold in the U.S. last year, up from $37 billion in 2016, according to mtn-i, a London-based data provider.

Morgan Stanley and Bank of America announced in July that they were backing a competitor called Luma. Halo Investing, a financial-technology startup, also has a rival platform.

Simon -- an acronym for Structured Investment Marketplace and Online Network -- was originally developed as a conduit between Goldman's securities desk and the firm's private bankers, who bought Goldman-issued notes on behalf of wealthy clients. The bank opened it up to outside firms in 2015 and has enrolled thousands of brokers at firms including Raymond James Financial Inc.

The Wall Street Journal reported last year that Goldman was looking to sell a stake in Simon. The $100 million valuation is in part a bet that Simon can expand beyond structured notes into annuities, market-linked certificates of deposit and potentially exchange-traded funds, people familiar with the matter said.

Under the deal being finalized, outside investors would put more than $50 million into Simon, the people said. Goldman will retain a minority stake, and the team that has overseen Simon since its 2015 launch are leaving to run it, the people said.

Write to Liz Hoffman at liz.hoffman@wsj.com

 

(END) Dow Jones Newswires

September 19, 2018 10:14 ET (14:14 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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