Goldman Sachs is giving select clients access to one of its hottest businesses

The Wall Street giant has started allowing certain asset-management clients—namely insurance companies—to invest alongside it when it loans money to borrowers including private-credit funds and nonbank lenders such as mortgage providers.

The move is the first offering involving this type of loan by Goldman’s asset-management arm. It is part of a plan to roughly double its private-credit assets under management to $300 billion in the next five years.

Each year, Goldman makes billions of dollars of asset-backed loans, so called because they are tied to collateral. For example, if a lender it finances goes bust, Goldman could take over a pool of mortgages or other consumer loans.

The asset-backed lending business has surged with the explosive growth of private markets and as regional banks that offered similar loans, such as Signature Bank, have closed.

Goldman holds the least risky pieces of the loans on its balance sheet and, until now, hasn’t given asset-management clients access to them. Goldman’s asset-management business will also give insurance clients access to other asset-backed loans, such as aircraft financings.

The seemingly insatiable appetite of big insurance companies for less-risky debt has been a major driver of the private-credit industry’s growth. Insurers, particularly those that sell annuities, make money by earning more than they are required to pay out. To do that, they need a constant stream of relatively safe debt to invest in.

For years, that meant mostly corporate and government bonds, until investment firms such as Apollo Global Management, KKR and Blackstone pushed into managing insurance assets by offering the potential for higher returns. Those firms either own or have exclusive asset-management deals with insurers, giving them a constant supply of new assets to manage. Like Goldman, the firms themselves have been doing more asset-backed lending, largely to cater to their insurance investors.

Revenue for FICC financing, the Goldman unit that does this type of asset-backed lending, reached $1.7 billion in the first half of 2024, a 34% jump from a year ago. FICC, which stands for fixed income, currencies and commodities, is part of Goldman’s markets team, and its financing unit includes a broad range of lending that Goldman arranges for clients.

FICC financing and private credit are both crucial to Goldman’s turnaround efforts following its exit from consumer lending. Both aim to generate more recurring revenue to offset the bank’s more unpredictable investment-banking and trading businesses.

The financing team is part of Goldman’s biggest division, global banking and markets, and could use capital from insurance clients in Goldman’s private-credit unit to become a bigger lender. Private credit, meanwhile, is part of Goldman’s second-biggest division, asset and wealth management, and needs to attract more assets to manage.

The private credit team will determine whether to invest clients’ money in these asset-backed loans after the financing team tells them which deals are available.

The cross-divisional effort is part of a long-running push by Goldman Chief Executive David Solomon and President John Waldron to encourage employees to direct business to other units of the bank.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com and Miriam Gottfried at Miriam.Gottfried@wsj.com