Goldman Sachs chief sees growth opportunity in adding new LPs

The investment banking giant is looking to ramp up opportunities in Europe and Asia via its asset management and wealth management units.

Goldman Sachs wants to boost its asset management and wealth management businesses in Europe and Asia respectively, its chief executive said.

Goldman Sachs Asset Management (GSAM) in August entered into an agreement to acquire Netherlands-based asset manager NN Investment Partners for approximately €1.6 billion, taking GSAM’s total assets under supervision in Europe to over $600 billion.

“There’s no question, one of the reasons why NN was really attractive to us is that in our asset management business, we’ve been punching below our weight across Europe, both in terms of the assets that we were supervising but also in our distribution capabilities and NN accelerates that. I still think there’s more opportunity there,” the bank’s chairman and chief executive David Solomon said during the firm’s third-quarter earnings call on Friday. He was responding to an analyst’s question about market share opportunities.

Solomon added that the public portion of Goldman Sachs’ asset management business can be scaled up. He also noted that the bank is looking to tap more opportunities in China and the US around its wealth management business.

“I think there are wealth management opportunities for us in the US as we move from simply managing money with ultra-high-net-worth clientele that have been our traditional private wealth management business to a more mass affluent structure and using digital technology,” he said.

In May, GSAM also teamed up with China’s largest bank, Industrial and Commercial Bank of China, to form a wealth management joint venture as it seeks to take advantage of the country’s rising affluence.

Solomon said during the call that a big part of the bank’s growth opportunity is adding new LPs to its ecosystem. He noted that capital raised last year for its opportunistic credit fund, Strategic Solutions, came from “new and significant institutional LPs” that had joined its platform for the first time.

“There’s a big opportunity for us to continue to expand that,” Solomon said. “It’s something we’re very focused on. But the opportunity for us is less in product addition, although we are adding products.”

Goldman Sachs’ Sustainable Investment Group, part of GSAM, in March launched its Horizon Environment and Climate Solutions Fund with a $1 billion target. Capital raised for the vehicle will target sustainable food and agriculture as well as growth-oriented investments across climate-transition themes that include waste and materials, ecosystem services and water, clean energy and sustainable transport.

Asked about his outlook for fundraising and deal activity over the next 12 months, Solomon noted that the frenzied paced of deal-making is unlikely to continue. “In the past, when sponsor activity has increased, it runs for a while, but then ultimately there’ll be something that backs it off.”

He noted that the bank is keeping an eye on the velocity of its lending into sponsor activity as part of its risk management.

Goldman’s asset management business recorded net revenues of $2.28 billion for the third quarter of 2021, 18 percent lower than Q3 2020 and 56 percent lower than a strong second quarter of 2021, per a statement. The decrease compared with the prior year was primarily driven by significantly lower net revenues in its equity investments.

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