Making a bear case for the venerable Goldman Sachs (NYSE:GS) seems kind of crazy. Isn't the firm a modern-day Midas? It's hard to argue with the company's stunning results over the years. Yet to keep revving the growth engine, Goldman is taking on considerable risk, and that may be a problem for shareholders.

While Goldman built its franchise by providing advisory services, the company is much different today. About two-thirds of its revenue comes from trading and investing with its own equity. Buying shares of Goldman is like investing in an alternative asset management firm like Blackstone or Fortress Investment Group (NYSE:FIG).

That's fine, but it can be volatile. To remain a top player, an alternative asset management firm needs to keep posting strong returns. If not, there are many other places for major investors to put their money.

Consider Goldman's $10 billion Global Alpha hedge fund. According to a piece on, there was 3.4% decline in the fund for the first four months of this year. Stuffing cash into a low-fee S&P 500 index fund would have been a much better strategy. This lackluster performance is no fluke. Global Alpha has eroded by 12% since 2005.

If Goldman doesn't get things back into shape, there could be outflows, and that would mean losing out on lucrative fees. I'm sure competitors such as JPMorgan Chase  (NYSE:JPM), Morgan Stanley (NYSE:MS), and others are trying to persuade Goldman investors to move their capital.

There is also the issue of the "high-water mark." This means Global Alpha needs to return to its prior high to get incentive fees. Might this mean taking on more risks to bump up returns?

Private-equity pitfalls
Another key piece to the Goldman growth engine is private equity. As seen with its latest $20 billion fund, the firm has lots of traction in this category.

Other private-equity firms have also been racking up high returns and are raising megafunds. This means more bidding on deals, potentially higher risks, and probably lower returns. At the Asia Society conference in mid-May, the cofounder of The Carlyle Group, David Rubenstein, said private-equity firms should expect some blowups as well as lower returns.

Despite the warnings, Goldman appears to be unabashed in taking more and more risk on its private-equity deals. One interesting trend is buying tech companies, as seen in the recent buyout of Alltel (NYSE:AT). Goldman teamed up with TPG to pay a whopping $28 billion for the wireless operator.

While Alltel has decent growth, it still is a small player compared with Verizon (NYSE:VZ) and AT&T (NYSE:T). There will likely need to be large investments in new spectrum to remain competitive. For this, Goldman was willing to accept a valuation of 15 times trailing-12-months cash from operations.

It does help that debt financing is dirt cheap right now and junk-bond default rates are at all-time lows. But with interest rates creeping up lately, it's inevitable that private-equity deals will get costlier.

Bearish bottom line
I agree that Goldman is the premier global financial firm. It's tough to argue with this. My concern is that the firm is increasingly putting a big chunk of its capital into high-risk categories such as hedge funds, private equity, and trading. To continue its growth, Goldman has no choice.

But if you look at the history of high finance, the implosions are typically the result of balance-sheet bets. Even Goldman has cautionary tales. In the 1920s, Goldman put its capital into a dodgy closed-end fund and almost went bust. Then in the early 1970s, Goldman made a horrible bet on Penn Central.

I still think an implosion at Goldman is unlikely. But with higher interest rates, low returns on Global Alpha, and increased risks of its private equity business, it's getting much tougher being Midas.

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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is ranked 1,161 out of 29,574 rated investors in Motley Fool CAPS. The Fool has a disclosure policy.