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Goldman (GS) Eyes Private Credit Portfolio Expansion to $300B
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The Goldman Sachs Group, Inc.’s (GS - Free Report) asset management arm plans to expand its private-credit portfolio to $300 billion by 2029 from the present $130 billion. This was first reported byReuters, citing an interview with the company’s management.
“People are very much focused on executing our strategy around the two big businesses and are very comfortable around the direction of the firm,” management remarked.
At present, investment banking and trading account for around 70% of Goldman’s revenues. The company anticipates asset and wealth management to be the second-highest contributor to revenues. Hence, its focus on the expansion of private credit is in line with this objective.
Through these efforts, management aims to improve the asset management arm’s return on equity to the mid-teens range in the medium term by reducing investments with low returns.
Per Reuters, at least one-third of the $40-$50 billion that Goldman plans to raise for alternative investments in 2024 will finance private credit strategies.
Also, at its investor day last year, the company unveiled plans to increase revenues in asset and wealth management in the high-single-digit range in the next three to five years. It also aimed to reduce its $30-billion legacy investments to less than $15 billion by the end of 2024. These investments were $16.3 billion at 2023 end.
Goldman’s focus on its core strengths of investment banking and trading operations comes at a time when the bank is pivoting from the consumer banking business. This refocus will help it generate more durable and recurring revenues.
Particularly, in fourth-quarter 2023, it sold its Personal Financial Management unit to Creative Planning. In the quarter, it sold the majority of its consumer lending platform, GreenSky’s loan portfolio, and entered an agreement with a consortium led by Sixth Street Partners to divest GreenSky. The deal is expected to close in the first quarter of 2024. In 2023, it closed the sale of substantially all of the Marcus loans portfolio. Apart from these divestitures, the company is offloading its credit card program with General Motors.
A number of lenders have announced private credit partnerships and others are considering alternative options.
Citigroup Inc. (C - Free Report) , along with LuminArx, announced the launch of Cinergy, a financing tool for the private lending market. Cinergy is expected to offer a wide range of private credit solutions to companies, including Citigroup’s client base.
Mitali Sohoni, the head of asset-backed financing at C, said, “The private lending market is experiencing transformative growth, and we are pleased that Cinergy will enhance our ability to meet the capital needs of our clients. Powered by LuminArx’s execution capabilities and the significant industry experience of its team, I believe Cinergy represents a truly differentiated offering.”
In late February, it was reported that JPMorgan (JPM - Free Report) was close to finalizing a partnership with FS Investments and Octagon Credit Investors. The move is expected to help JPM diversify its investment solutions and enhance offerings in the rapidly growing private credit space.
In November 2023, Bloomberg reported that JPM was looking for third-party capital to supplement more than $10 billion that the bank had allocated for its private credit strategy. The financial giant wanted to bring together a group of lenders for the purpose of funding the private credit deals it originated.
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Goldman (GS) Eyes Private Credit Portfolio Expansion to $300B
The Goldman Sachs Group, Inc.’s (GS - Free Report) asset management arm plans to expand its private-credit portfolio to $300 billion by 2029 from the present $130 billion. This was first reported byReuters, citing an interview with the company’s management.
“People are very much focused on executing our strategy around the two big businesses and are very comfortable around the direction of the firm,” management remarked.
At present, investment banking and trading account for around 70% of Goldman’s revenues. The company anticipates asset and wealth management to be the second-highest contributor to revenues. Hence, its focus on the expansion of private credit is in line with this objective.
Through these efforts, management aims to improve the asset management arm’s return on equity to the mid-teens range in the medium term by reducing investments with low returns.
Per Reuters, at least one-third of the $40-$50 billion that Goldman plans to raise for alternative investments in 2024 will finance private credit strategies.
Also, at its investor day last year, the company unveiled plans to increase revenues in asset and wealth management in the high-single-digit range in the next three to five years. It also aimed to reduce its $30-billion legacy investments to less than $15 billion by the end of 2024. These investments were $16.3 billion at 2023 end.
Goldman’s focus on its core strengths of investment banking and trading operations comes at a time when the bank is pivoting from the consumer banking business. This refocus will help it generate more durable and recurring revenues.
Particularly, in fourth-quarter 2023, it sold its Personal Financial Management unit to Creative Planning. In the quarter, it sold the majority of its consumer lending platform, GreenSky’s loan portfolio, and entered an agreement with a consortium led by Sixth Street Partners to divest GreenSky. The deal is expected to close in the first quarter of 2024. In 2023, it closed the sale of substantially all of the Marcus loans portfolio. Apart from these divestitures, the company is offloading its credit card program with General Motors.
Shares of this Zacks Rank #3 (Hold) company have gained 14.5% in the past six months, outperforming the industry’s growth of 11.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Other Banks Seeking Expansion in Private Credit
A number of lenders have announced private credit partnerships and others are considering alternative options.
Citigroup Inc. (C - Free Report) , along with LuminArx, announced the launch of Cinergy, a financing tool for the private lending market. Cinergy is expected to offer a wide range of private credit solutions to companies, including Citigroup’s client base.
Mitali Sohoni, the head of asset-backed financing at C, said, “The private lending market is experiencing transformative growth, and we are pleased that Cinergy will enhance our ability to meet the capital needs of our clients. Powered by LuminArx’s execution capabilities and the significant industry experience of its team, I believe Cinergy represents a truly differentiated offering.”
In late February, it was reported that JPMorgan (JPM - Free Report) was close to finalizing a partnership with FS Investments and Octagon Credit Investors. The move is expected to help JPM diversify its investment solutions and enhance offerings in the rapidly growing private credit space.
In November 2023, Bloomberg reported that JPM was looking for third-party capital to supplement more than $10 billion that the bank had allocated for its private credit strategy. The financial giant wanted to bring together a group of lenders for the purpose of funding the private credit deals it originated.