Goldman Sachs, the US investment banking leader is seeking to expand into the private equity and asset management lending market, amid a global expansion overseas.
The move comes as part of its efforts to fill the void left by the turmoil seen at regional banks last year, and the collapse and subsequent sale of Credit Suisse to UBS.
Goldman Sachs: Filling a market gap
Goldman Sachs has already purchased a US$15bn loan facilities portfolio from one such failed bank, Signature Bank, during a Federal Deposit Insurance Corp (FDIC) auction.
Speaking to Reuters, Goldman Sachs’ Global Head of Mortgage and Structured Products, Maheshwar Saireddy, says: “The focus is to lend to large alternate asset managers, private equity sponsors.
“One of the big initiatives we’ve been working on is to create more stable revenue in our global banking and markets businesses.”
Recently bolstering its US business, Goldman Sachs has aimed its expansion for Europe, the UK and Asia, reportedly adding staff in Bangalore and Dallas for its lending market expansion.
The investment bank’s new portfolio includes loans to core areas of its client base, including private equity companies and venture capital funds, providing options to manage their capital call facilities or subscription line loans.
Expanding this asset-secured lending service helps Goldman Sachs build a growing financial business in fixed income, currency and commodities, and equities.
Maheshwar adds: “We’ve grown our deposit base tremendously over the past five to seven years. And as our deposits are growing so we are trying to line up assets to match those deposits.”
The lending market: An increasingly competitive space
However, Goldman Sachs is not the only financial leader looking to muscle in on the lending market. Its US rivals JPMorgan Chase and PNC Financial Services are also stepping up efforts in private equity and asset management lending.
This is no surprise, the market is estimated to be worth between US$800bn and US$1tn, and private equity deal activity is only expected to pick up due to recent record-high fundraising.
Being asset-backed and short-term, these loan types are typically low-risk, heightening their appeal in a recent macroeconomic environment tinged with uncertainty and volatility.
Goldman Sachs’s activity has been continuing in the private credit space in recent weeks, leading a funding round in global fintech SumUp.
This represented the biggest European private credit fintech transaction in years – a key market where Goldman Sachs is looking to expand.
