Goldman amasses $5bn for Petershill’s latest GP stakes fund

The fundraise comes months after GSAM listed a Petershill portfolio of 19 GP stakes on the London Stock Exchange’s main market in a deal valued at more than $5bn.

Goldman Sachs Asset Management’s Petershill unit has gathered $5 billion for its latest GP stakes fund at a time when alternative investment managers are increasingly looking at ways to expand their capital bases.

Petershill IV was oversubscribed and received commitments from a diverse group of predominantly institutional investors, according to a statement seen by Private Equity International. The firm began raising capital around the end of 2019 with a target of up to $4 billion, it is understood.

“We have received lot of support from existing LPs wanting to re-up and participate as well as new institutional investors, many of whom are new not only to Petershill, but to the broader alternatives platform,” Julian Salisbury, global head of GSAM, told PEI.

He added that Petershill IV’s closing was one of dozens of capital raises for the firm this year across private equity, credit, real estate and climate-focused funds.

Ali Raissi-Dehkordy, global co-head of Petershill Group, said institutional investors had been the primary sources of capital for Petershill to date. He noted that more than 50 had committed to Fund IV amid rising “understanding of the asset class and the fact that they are also driving the growth of the industry with their LP investments”. To put that in context, he added that Fund I capital mainly came from seven investors, while most of the capital raised from Fund III had come from 14 LPs.

New Mexico Public Employees Retirement Association, Employees’ Retirement System of the State of Hawaii and Taiwan Life Insurance committed $70 million, $50 million and $20 million respectively to Petershill IV, PEI data shows.

The latest fund is double the size of its predecessor, which closed in 2018 on approximately $2 billion. The amount at the final close includes co-investment commitments, PEI understands.

Petershill IV will seek 15 investments in mid-market GPs with a projected 1.5x to 2.0x gross total-value-to-paid-in ratio over the life of its term, as PEI previously reported. The fund has already backed eight managers, including Pittsburgh-based Incline Equity Partners and Washington, DC-based Arlington Capital Partners.

Raissi-Dehkordy said potential GP stakes investors were keen to understand why GPs look to transact, and that alignment of interest was also an important consideration.

“Deal rationale has been a core element that we focused on for the last 15 years since the start of our programme,” he said. “We think alignment is such an important consideration and we frame all of our investments in terms of that understanding. ‘How does this investment make the firm better? How does it make it a better product and offering to their underlying LPs? Can we add value as a partner? And how do our investors benefit from it?’”

Raissi-Dehkordy added: “What you see in the majority of our investments is we’re creating balance sheets. We’re investing primary capital in these firms, which then go on to increased GP commits or go on to create new products. That element of alignment is very clear.”

The fundraise comes months after GSAM listed a portfolio of 19 GP stakes on the London Stock Exchange’s main market in a deal valued at more than $5 billion. The portfolio represented roughly $187 billion of assets under management and includes private equity firms such as Accel-KKRClearlake CapitalFrancisco PartnersGeneral Catalyst Partners and Harvest Partners.

Petershill Partners, the listed investment vehicle, sold £1.2 billion ($1.6 billion; €1.4 billion) of stock in the initial public offering. Shares were down nearly 30 percent as of early this week after opening at 350 pence per share in September.

Raissi-Dehkordy said the listing was an “important step” in the programme and that the firm continues to hold a material portion of equity in the public company.

“It’s a strong business, but it’s very early in the journey,” he said. “Petershill Partners actually demonstrates the next step in evolution in that it’s permanent long-term capital, and that’s being celebrated by many of our partners in that it allows them to continue to be partners with Goldman Sachs in the long term, while also creating liquidity outcomes for the underlying LPs.”

GP stakes have become an increasingly popular strategy in recent years. Total fundraising in 2019 surpassed $23 billion, more than four times the $5.3 billion recorded in 2016, according to PitchBook. As of May 2021, GP stakes funds in market were targeting $24.5 billion.

More than a third of investors would like to back GP stakes funds or have already done so, according to PEI‘s LP Perspectives 2022 Study. This is despite concerns around exits and potential conflicts of interest.

Industry heavyweight Dyal Capital Partners experienced this first-hand in its merger with credit firm Owl Rock last year. The merger was unsuccessfully challenged in court by two Dyal portfolio companies that saw the firm’s new partner as a competitor. The fracas raised questions over whether the GP stakes model is fraught with potential conflicts.