Wall Street bank keen to retain its foothold in one of the fast-growing segments of the asset management industry
Goldman Sachs has amassed more than $20bn to invest in private credit, giving it firepower to push ahead in one of the fastest-growing corners of the asset management industry.
The group on Wednesday said its asset management arm had raised $13.1bn for its fifth and largest senior direct-lending fund, known as West Street Loan Partners V. It will rank among the largest dedicated funds to write loans to companies across the globe, with a growing number of businesses turning to these non-bank lenders for capital.
The $13.1bn sum includes money Goldman has raised from external investors, as well as bank loans and backing from the group’s own balance sheet. It has raised a further $7bn from investors for separately managed accounts that will invest with the same strategy and $550mn in co-investment vehicles that will lend alongside the fund.
Goldman Sachs was an early leader in private credit, an area of asset management that is increasingly in vogue as insurers, sovereign wealth funds and pensions up their commitments to the asset class. That has spawned a new cohort of leaders within the alternative asset investment industry, with the likes of Ares Management, HPS Investment Partners, Blue Owl and Sixth Street becoming the new dominant force on Wall Street.
Goldman is attempting to grow the amount of outside money it manages to provide it with more stable fee-based revenues that complement its more volatile investment banking and trading business.
The group is keen to retain its foothold in private credit and take market share as its traditional rivals attempt to work out their own strategies. Those banks, including JPMorgan Chase and Bank of America, do not have the large-scale funds ready to deploy in private credit that Goldman has amassed.
Several banks, including Barclays and Wells Fargo, have partnered with asset managers to extend their reach into private credit. Others, such as JPMorgan, are in active dialogue with potential partners, said people briefed on the matter.
The rapid growth of private credit has raised alarm bells for global financial regulators and policymakers, which worry about the risks such lenders may pose to the banking system. Many credit funds borrow from traditional banks to boost the amount of capital they have to lend.
New York-based Goldman hopes to more than double its private credit business over the next five years, to $300bn from about $130bn today. This year its private credit funds have financed Macquarie Capital’s takeover of Swedish construction software company Byggfakta and private equity group TPG’s purchase of auto repair shop Classic Collision.
Greg Olafson, who runs the private credit business at Goldman, said the fundraising was crucial to the bank’s wider ambitions within private equity.
“We have been lending to these companies and [private equity] sponsors for decades, long before private credit scaled,” he said. “It allows us to continue to serve that client base, which is probably one of the firm’s largest . . . Private equity writ large is really core to the firm’s business.”
