Stone Street is one block north of Bridge Street in Manhattan’s financial district. Both are near Goldman Sachs’s former headquarters at 85 Broad St.

Override Fees

The Bridge Street and Stone Street funds are managed by Goldman Sachs’s merchant-banking division, which is led by Richard Friedman and also runs the firm’s client funds. The bank typically doesn’t charge partners management fees or overrides, the manager’s cut of gains, often called carried interest.

The employee funds raise questions about conflicts of interest similar to those posed by the firm’s principal investments. Goldman Sachs hasn’t disclosed the criteria it uses to decide when to invest client funds in a company versus using its own balance sheet or employee funds.

“The negative of things like this is clients always wonder if you’re saving the best stuff for yourselves,” Johnson said. “So you’ve got to be careful with that and let them know that clients either come first or are beside us in the deals, but we’re not ahead of the clients.”

Goldman Sachs also often serves as underwriter on IPOs for companies in which it has invested, leading competitors to question whether the firm will push for a higher price than the market would dictate.

Stemming Defections

Banks including Morgan Stanley and Citigroup Inc. haven’t made private-equity funds broadly available to employees since 2008. Those two firms offered funds before the financial crisis in which it leveraged employee contributions by lending $2 to the fund for every $1 committed, allowing bankers to benefit from profits made beyond the cost of the loan.

Goldman Sachs’s employee funds are modeled on those of hedge funds and asset-management firms, which often reinvest a portion of annual bonuses in their funds, said Ilana Weinstein, founder of New York-based recruiting firm IDW Group LLC.

The efforts might not be enough to stem defections of some traders seeking higher pay and less regulation, Weinstein said. The average amount Goldman Sachs set aside last year for compensation per employee was $383,374, down from $661,490 in 2007. The firm’s partners typically receive a $900,000 salary and often earn many times that in bonuses.