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Goldman Sachs Boosts Lending to Private Equity and Asset Managers

New York, May 17, 2024 – Goldman Sachs Group Inc. (GS.N) is amping up its lending to private equity and asset management firms to capitalize on a gap in the market left by regional banks that were in turmoil, and Credit Suisse was recently sold.

The Wall Street giant plans to expand its presence in this $800 billion to $1 trillion market, buoyed by record-high private equity fundraising. Goldman Sachs joins The Wall Street Bank, JPMorgan Chase (JPM.N), and PNC Financial Services (PNC.N) in stepping up their lending activities, as private equity dealmaking is expected to pick up.

Filling the Void

Goldman Sachs is raising private equity funding to fill the gap in the market for subscription line financing. This strategic shift follows their acquisition of a $15 billion loan portfolio from the failed Signature Bank through an FDIC auction.

“The focus is to lend to large alternate asset managers, private equity sponsors, said Maheshwar Saireddy, Goldman Sachs’ global head of mortgage and structured products, in a statement to Reuters. “This is part of a larger initiative to create more stable revenue streams in our global banking and markets businesses.

Global Expansion Plans

After establishing a strong foothold in the U. S., Goldman Sachs intends to broaden its reach to Europe, the U.K., and Asia. To adequately service new loan markets, the investment bank has pro-actively boosted its staff in Dallas and Bangalore.

Capitalizing on Growth

The increased focus on asset-secured lending aligns with Goldman Sachs’ plan to build a robust financing business in fixed income, currency, and commodities (FICC) and equities. The bank’s deposit base has grown significantly in recent years, and this lending strategy allows it to utilize those deposits efficiently.

In the first quarter of 2024, Goldman Sachs set a new record, generating $852 million in financing activities within the Fixed Income, Currency, and Commodities (FICC) market.

Market Trends

While the demand for subscription lines has grown, the supply of these loans has lagged in the past two years. This is due, in part, to a decline in lending activity by some banks in response to the Federal Reserve’s monetary tightening policies in 2022 and 2023.

New Players Emerge

The underserved market for subscription line financing presents an opportunity for new entrants. Goldman Sachs is not alone in capitalizing on this gap. The acquisition of First Republic Bank last year positioned JPMorgan Chase to become a major player. At the same time, PNC Financial Services bolstered its presence through the purchase of a capital commitments facilities portfolio from Signature Bank.

The market may also see the participation of non-bank lenders as traditional banks face capital constraints. This influx of new lenders suggests a dynamic shift in the private equity and asset management financing landscape.

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