It’s the Summer of Private Credit — And Goldman Sachs Wants In

The bank’s asset management business is preparing to capitalize on opportunities during a lender’s market.


Illustration by II

Private credit is hot right now, and investors want in on the action. Goldman Sachs Asset Management is ready to oblige them, chief investment officer Julian Salisbury said during a meeting with reporters on Thursday.

After a “lost decade” for private credit, rising interest rates have made the asset class attractive again. Yields have increased from 5 to 8 percent to well more than 10 percent and creditors have the upper hand in negotiations, according to BCA Research, a sister company of Institutional Investor.

At the same time, the $1.5 trillion private credit market is set to get even larger.

In public markets, there’s been dispersion in company performance this year. That same thing will happen in private markets, but it can take months, or even years, for that to unfold. Investors are betting, especially if a recession occurs in the U.S., that more companies will eventually need to refinance — and that many of them will turn to private lenders.

It could take as long as three years for that debt shoe to drop. Goldman’s managers are “readying themselves for opportunities,” Salisbury said.

GSAM managed $170 billion in private credit assets at the end of 2022 and that number is growing steadily. The manager raised $4 billion for private credit strategies in the first quarter and another $2 billion in assets in the second quarter.

Bank failures early this year have also caused traditional lenders to tighten their books and led to talks of tougher regulations, creating what Blackstone called private credit’s “golden moment” and leading JPMorgan Chase CEO Jaime Dimon to gripe during an earnings call that that hedge funds and private credit firms are winning the business of banks and “dancing in the streets.”

Not all private credit deals will be a sure investment success though, Salisbury cautioned.

Regional banks account for more than 60 percent of commercial real estate loans — many from recent years with short durations that will need to be refinanced, he said. But “it’s not clear where the alternative source of capital is coming from.”

Goldman is “excited” to be an alternative source of capital for real estate in the future, but right now there isn’t much activity, Salisbury said. The struggles of office buildings are getting worse, as New York Magazine has reported, but multifamily housing and logistics centers might also be troubled.

As for undesirable office buildings in less favorable cities and locations? Salisbury made his opinion clear: “It’s bad, it’s very bad.”