Goldman Sachs is setting up a new business unit to compete with private credit funds.
Announcing the move, Goldman CEO David Solomon called private credit “one of the most important structural trends taking place in finance”.
Private credit funds have been taking more high-margin deals from investment banks over the last few years – including debt financing for leveraged buyouts.
Goldman’s new unit will compete with private credit funds. They have named this business the Capital Solutions Group.
It will be staffed with private credit, private equity and structuring bankers.
The idea seems to be to originate private credit deals – and sell some or all of the risk out to Goldman’s institutional investors through its sales and trading teams.
Solomon spoke about demand from Goldman’s investing clients for private-form investment grade, leveraged lending, hybrid capital, asset-backed finance and equity.
This move could leave Goldman’s private credit clients seeing the firm as more of a direct competitor. But it potentially also opens up new value for these clients – where Goldman could come in as a co-investor or secondary-market counterparty.
It allows Goldman to offer private equity and corporate clients with more private credit solutions – and potentially better pricing and faster deals. It also increases the scope of products that institutional investors can get from Goldman – adding to the value of the investment bank’s institutional sales platform.
Goldman is well positioned for this new private credit investment banking business. It has a strong origination platform with over 10,000 corporate clients, a global sales and trading platform with access to most large institutional investors to sell down risk, and private credit asset investment capacity in its asset management business.
This new Capital Solutions Group will be co-headed by Peter Lyon and Mahesh Saireddy.
Peter is currently the Global Head of Goldman’s Financial Institutions Group. Mahesh is Global Head of Mortgages and Structured Products.
In a sign of the importance of private credit to Goldman’s future – both Peter and Mahesh will join the firm’s Management Committee.
The Capital Solutions Group will contain an origination team – that will source investment grade credit, leveraged loans, real estate, infrastructure, other asset-backed finance and private equity deals.
In addition to adding this Capital Solutions Group to expand their private credit business in their Global Banking and Markets division, Goldman has also made changes to try to grow their private credit business in their Asset and Wealth Management division.
Vivek Bantwal – Global Head of the Financing Group in Global Banking and Markets – is moving to Asset and Wealth Management. He will co-head the Global Private Credit team with James Reynolds. This team’s private credit portfolio currently has $145 billion in assets. The aim with this move is to work more closely with Global Banking and Markets to source deals. Sourcing enough high quality deals has become a key constraint across the industry – as the money raised by private credit funds that needs to now be deployed has grown rapidly over the last year.
