Goldman Sachs raises $15bn to buy stakes in private equity funds

Goldman Sachs has raised more than $15 billion (€14 billion) to buy investors’ stakes in private equity funds and invest in deals where buyout groups sell portfolio companies from one of their funds to another, in the latest sign of sustained support for the fast-growing “secondary” strategy.

Goldman’s asset management unit raised more than $14 billion for its largest-ever flagship secondaries fund and in excess of $1 billion for its debut fund focused on secondary deals in the infrastructure sector, the bank’s global head of secondaries Harold Hope told the Financial Times.

“This is a really big step up and it was done in a difficult market,” Mr Hope added. The firm’s last secondaries fund raised just over $10 billion in 2020.

Private equity fundraising has slowed over the past 12 months after many investors found themselves overallocated to so-called alternatives – which also include private credit, real estate and infrastructure – or struggling to generate liquidity as deal making globally has slowed.

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But some of the top secondary funds, which offer investors such as pension funds and sovereign wealth funds the chance to cash out investments early, have still been able to raise large sums of money for these deals.

Goldman’s peers including Wall Street rival Blackstone and French private equity group Ardian have both raised more than $20 billion this year for their secondary funds.

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“The opportunity set is as big as it’s ever been,” Mr Hope said. He added that the need for some investors to get liquidity in an asset class that typically locks money up for more than a decade has offered attractive investment opportunities.

“We’ve been a bit more biased towards buying traditional LP (limited partner) portfolios and we’ve been able to price them at an appropriate discount,” Mr Hope said.

Goldman is one of the longest-established players in a secondaries market that has grown significantly over the past decade, a function of the huge expansion of the private market industry to almost $13 trillion today.

The decision to raise Goldman’s first fund specifically focused on investor stakes in infrastructure was taken as the firm experiences an uptick in deal flow in the space.

Many private equity groups, traditionally focused on leveraged buyouts of companies, have been able to raise ever-larger funds to buy infrastructure assets. Other specialist players have also emerged targeting assets that will benefit from big macroeconomic trends such as the energy transition.

“For us, it was a natural evolution. We want to be able to prove to investors we can solve your liquidity needs across your private markets portfolio,” Mr Hope said.

The bumper fundraise is a boost to Goldman’s asset management unit, which has been hit by a number of high-profile departures this year including that of chief investment officer Julian Salisbury. The asset management arm, which also manages private equity and infrastructure funds, has more than $2 trillion in assets under supervision globally. – Copyright The Financial Times Limited 2023