new york (Bloomberg) — Goldman Sachs Group Inc., the sixth-biggest US bank, should repay $5 billion to Warren Buffett before refunding US government aid because it would boost earnings, Rochdale Securities analyst Richard Bove said.

"It would not be appropriate for Goldman to pay back the TARP funds," wrote Bove, referring to the US Treasury's Troubled Asset Relief Programme. "They cost less than the funds received from Warren Buffett. These are the funds that should be repaid if Goldman wanted to maximise earnings for shareholders."

Goldman Sachs, based in New York, is considering selling shares as soon as this week to raise money, which would help it repay the $10 billion it received from the US Treasury in October, the Wall Street Journal reported last week. Repaying the government money would free Goldman Sachs from restrictions on compensation and hiring imposed on companies that took government money.

"Goldman may believe shareholders should stand in line while it pays off management first by eliminating TARP," Bove wrote.

Goldman Sachs sold $5 billion in preferred stock to Warren Buffett's Berkshire Hathaway Inc. in September. Buffett gets a 10 percent dividend on the stock, or $500 million a year, and gained warrants to buy $5 billion of common stock at $115 each over the next five years. The investment also requires the company's top four senior executives to keep 90 percent of the stock they own in the company until Buffett is repaid or until October 1, 2011.

A month later the US Treasury bought $10 billion of preferred stock from Goldman Sachs. The Treasury gets a five percent dividend, or $500 million a year, which rises to nine percent after five years, and received warrants worth one-fourth of what Buffett gained, according to data compiled by Bloomberg.

Meanwhile, Goldman raised a fund with about $5.5 billion in capital commitments to purchase private-equity assets on the secondary market.

The GS Vintage Fund V, Goldman Sachs' fifth dedicated private-equity secondary fund, will acquire portfolios ranging from $1 million to more than $1 billion, the New York-based company said yesterday in a statement.

Private-equity investors such as Harvard University are taking losses, and other schools are selling their future commitments to funds on the secondary market at discounts as high as 50 percent. In 2009, investors may dump as much as $130 billion in commitments, according to David De Weese, a New York- based general partner at Paul Capital Partners, which has $6.6 billion of assets under management.

About nine percent of private-equity fund holders may sell their investments on the secondary market during the next two years, according to a survey released last month by Preqin, a London-based research firm. Private-equity assets worldwide total about $2.5 trillion, Preqin said.

The Goldman Sachs fund is the largest of its type, the Financial Times reported. JPMorgan Chase & Co., the second-biggest US bank by assets, is also raising a secondary fund that's pulled in about $500 million in the past few months, according to the report.