Goldman Private Credit Fund Bucks Industry Trend

Goldman Sachs’ new private credit fund is reportedly going against an industry trend.

As Reuters reported Monday (April 6), investors have requested to repurchase just under 5% of shares in the first quarter, remaining within its cap and amid an increase in redemption requests across the ​sector.

Unease that artificial intelligence (AI) could weaken the software industry has spread through the world of private credit, an important lender to tech companies, the report said. That’s led investors to rethink their exposure, redemption risks and fundraising potential.

Reuters noted that several asset managers have capped redemptions at the standard 5% quarterly limit following a recent wave withdrawal requests. This was prompted by negative media coverage as the $1.8 trillion private credit sector faces scrutiny surrounding standards for lending, valuations and transparency.

Goldman’s ability ​to meet all redemption requests while staying below its cap indicates stress is not being felt sector-wide, the report added. Reuters also cited a regulatory filing from Goldman saying ​the redemption requests, which were fulfilled and below its quarterly repurchase limit, were the only ones among contemporaries to come in under the 5% threshold.

“We believe these results highlight the strong position of GS Credit relative to the broader non-traded BDC (Business Development Company) industry,” the bank said in a regulatory filing, per the Reuters report.

Goldman added it is part of the same market as other BDCs and is not immune to industry dynamics, but has diversified its capital sources by focusing on an ‌”institutionally ⁠oriented” private credit offering, the report said.

“While retail and some wealth management investors are pulling back from private credit, we believe many institutional investors are recognizing this dislocation as an attractive entry or re-entry point into the asset class,” Goldman said in the filing.

As covered here in March, the debate around private credit has intensified recently as bank filings and executive commentary underline the sector’s size and potential vulnerabilities.

This asset class lives primarily outside the transparency standards that traditional banking or public debt markets must comply with. Loans are typically held in private portfolios and valued internally by the funds in which they originated, which can obscure deteriorating credit conditions until stress can no longer be ignored.

“The overarching concern may not herald an imminent crisis, but the structure of the market could amplify shocks if credit conditions deteriorate,” PYMNTS wrote.