TLDR:
- Goldman Sachs is expanding into the private equity lending market, filling a void left by other institutions.
- The bank plans to expand its lending business in the US, Europe, the UK, and Asia.
U.S. investment bank Goldman Sachs is making a move into the private equity and asset managers lending market, aiming to expand overseas as it fills the gap left by turmoil at regional banks and the sale of Credit Suisse. The bank, along with competitors JPMorgan Chase and PNC Financial Services, is increasing its presence in the market valued at $800 billion to $1 trillion, anticipating a rise in private equity deal activity due to record-high fund-raising. Goldman’s focus is on lending to large alternate asset managers and private equity sponsors, with plans to create more stable revenue in their global banking and markets businesses. After strengthening its business in the US, Goldman intends to grow in Europe, the UK, and Asia, adding staff in Dallas and Bangalore to facilitate these loans.
Goldman’s acquisition of a $15 billion loan portfolio from the failed Signature Bank last year included loans to private equity firms and venture capital funds, enabling these clients to manage their working capital through subscriptions line facilities. Such loans are short-term and asset-based, reducing risk for the bank. The expansion is part of Goldman’s strategy to build a financing business in fixed income, currency and commodities (FICC) and equities, as evidenced by the record FICC financing revenues posted in the first quarter. While loans to private equity firms may see a decrease during slow dealmaking years, new players are entering the market to fill the gap left by previous lenders’ exits or consolidations.
JPMorgan Chase and PNC Financial Services have also bolstered their presence in the private equity lending space, aiming to serve funds of varying stages and their principals. PNC, a regional lender based in Pittsburgh, Pennsylvania, acquired a portfolio of capital commitments facilities from Signature last year. The findings suggest that demand for subscription line financing has outpaced supply in recent years, attracting new players, including non-bank lenders, into the market. Ares, an alternative investment manager, is collaborating with banks to increase their capacity to provide subscription line loans, pointing towards a shifting landscape in the private equity lending market.
