Goldman Sachs' flagship private credit fund navigated the first quarter without hitting the industry's standard withdrawal limit, setting itself apart from several major competitors forced to cap redemptions amid growing investor concern about the sector.
Goldman Sachs Private Credit Corp reported that first-quarter redemption requests came in at 4.999% of outstanding shares – just a shade under the standard 5% quarterly cap – allowing the fund to meet all withdrawal requests in full.
By contrast, peers including Blue Owl Capital, Morgan Stanley, BlackRock and Apollo have all had to cap redemptions in recent weeks as withdrawal requests surged.
The $15.7 billion fund also pulled in roughly $1.04 billion in new subscriptions during the quarter, keeping net flows positive despite the broader turbulence gripping private credit markets.
The divergence comes as fears over artificial intelligence's potential to erode the earnings power of software companies have rattled the roughly $1.8 trillion private credit industry, which counts technology as a major lending vertical. Those concerns, compounded by scrutiny over lending standards, valuations and transparency, have prompted investors to reassess their exposure – pushing more than $8 billion into limbo across private credit vehicles to date.
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Goldman has attributed its relative resilience to its investor composition. Institutional investors account for over 80% of its broader Goldman Sachs Asset Management private credit platform. A source familiar with the matter told Reuters that many of those investors come from Goldman's private wealth channels, where clients have historically maintained long-term exposure and can tolerate illiquidity.
"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," the fund said in a letter to shareholders.
Goldman also sees opportunity in the disruption. The firm said it is observing a "meaningful shift" in the lending environment, with competition among lenders easing as retail capital retreats – a dynamic that improves deal terms for capital providers through stronger covenants, higher spreads and increased borrower costs.
“We have not seen a true credit cycle since the recovery from the Global Financial Crisis,” Vivek Bantwal, global co-head of private credit in Goldman Sachs Asset Management, said in a late March note. "There are a lot of new players in private credit that haven’t been tested through cycles.”
The firm is raising a $10 billion direct lending fund, with documentation and due diligence already underway on more than $10 billion in institutional commitments across its senior direct lending strategies.
In the filing, Goldman also took issue with how the broader sector has been characterized, stating that "much of the recent media coverage of private credit has, at times, lacked nuance or has omitted the material facts – conflating distinct segments of the credit markets to create the impression of a broad 'private credit problem.'"
On its own portfolio, the fund said "over 95% of the losses embedded in our results were unrealized, driven primarily by spread widening rather than by credit-specific events. No new names were placed on non-accrual during the period."
Not everyone expects the shift to deliver immediate gains. Meghan Neenan, head of non-bank financial institutions for North America at Fitch Ratings, told Bloomberg there could be some "rebalancing" as retail investors stay away, boosting spreads and covenants.
"But it will take some time for those to show up in financial reports or move the needle on overall portfolio metrics," she added.
Goldman's own fund posted a 0.4% return year-to-date through February, trailing the 1.3% recorded over the same period last year.
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