Goldman Says It’s Unlike Private Credit Peers Hit by Redemptions
Goldman Sachs Group Inc.’s asset management arm has sought to reassure clients that redemption rates and software exposure are both relatively low in one of its biggest retail-oriented private credit funds.
(Bloomberg) -- Goldman Sachs Group Inc.’s asset management arm has sought to reassure clients that redemption rates and software exposure are both relatively low in one of its biggest retail-oriented private credit funds.
As the $1.8 trillion industry grapples with heightened risk of investor withdrawals from retail funds and scrutiny over borrowers — especially the companies under pressure from the rise of artificial intelligence — the Wall Street firm distanced itself from its peers in a detailed letter Thursday.
The firm said enterprise software exposure in Goldman Sachs Private Credit Corp. was about 15.5% at the end of the third quarter, “which is toward the lower end of what peers have reported.” The fund’s fourth-quarter redemption rate of 3.5% was lower than the industry average, and a 7% decline in quarterly inflows was a “more moderate decrease relative to peers,” the firm added in the letter.
The firm said the majority of its $188 billion alternative credit assets is made up of institutional funds and separately managed accounts, with 17% coming from its US business development company, or BDC, complex.
“By having diversified sources of funding, you’ll be in a position where you can deploy capital through the cycle,” Vivek Bantwal, Goldman Sachs Asset Management’s global co-head of private credit, said on a conference call Friday. “Obviously, it’s easier to scale faster if you’re going all-in on the retail channel.”
The move to shore up confidence comes as non-traded BDCs face heightened redemption demands. Last month investors pulled around 15.4% of net assets from one of Blue Owl Capital Inc.’s tech-focused funds.
Blue Owl Anxiety Rattles $1.8 Trillion Private Credit Market
The Goldman Sachs investor letter also highlighted the firm’s underwriting standards, saying it hasn’t sacrificed these in a hunt for assets.
“We do not underestimate the risk of AI disruption,” the letter said. Still, the firm sees some winners emerging from an AI shake-out. Its letter highlighted companies “embedded in mission-critical workflows” and “proprietary data.”
It said the companies it oversees are less likely than many in the industry to rely on annual recurring revenue or payment-in-kind interest arrangements, which allow borrowers to pay interest with more debt.
Annual recurring revenue has “allowed companies to trade at way too high a multiple,” Marathon Asset Management Chairman Bruce Richards said in an interview with Bloomberg Television this week.
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