Goldman’s alts divestments explained
PEI Group senior editor Adam Le had the pleasure of interviewing Julian Salisbury, CIO of Goldman Sachs Asset & Wealth Management, on stage at the London School of Economics Alternative Investments Conference yesterday. The interview was timely – just the previous day, various media outlets had reported that GSAM was shedding part of its $59 billion in alternatives exposure and replacing this with third-party capital – something Salisbury was quick to point out is part of a plan formulated and disclosed in 2020 around capital reduction.
“More and more of our clients [wanted] to invest with us and alongside us,” he said, adding that at the time, Goldman didn’t have as many products to match client need. The capital intensity of using balance sheet to make investments, during a time when regulation was becoming less predictable and more punitive meant it was becoming harder to make long-term investment decisions with balance sheet capital – something the bank’s shareholders “weren’t really giving us any value for”, he said.
“In order to be competitive in the alternative landscape, you have to have larger pools of capital, you need to be able to show… that you can write large individual cheques and commit to deals,” he said.
If GSAM’s recent fundraises are anything to go by – it has raised at least $26.6 billion for buyouts, junior debt and a climate strategy in the last four months – it isn’t losing any time making headway on its plan. The firm will have news to share about its upcoming growth fund in the coming weeks, Salisbury added.
Expect more minority and flexible transactions this year. That’s according to panellists at the IPEM Conference in Cannes this week. “The key word for private equity this year will be flexible capital and being able to structure transactions without necessarily triggering a change of control,” Stéphane Etroy, head of European private equity at Ares Management, told attendees.
Many managers are holding out selling their assets at a discount, and a lot of companies that usually do well in “normal times” are finding there are not enough buyers. Managers holding onto these assets are also under pressure and are also looking for ways to keep up their distributions-to-paid-in capital, he added. “It’s incredible to see in the last six months a change in dealflow,”
Etroy said, adding that some managers have been open to other private equity players buying in via minority and structured equity transactions, something that puts “oil back in the system”.
Baby steps for equality
Research conducted by employment and partnership law specialists Fox & Partners has found that women make up just 15.1 percent of partners in private equity, hedge fund and other financial services partnerships in the UK. This figure is little-changed from the 14.8 percent recorded by the law firm a year ago. Catriona Watt, a partner at Fox, said of the report: “Narrowing the gender representation gap within senior levels within financial services is slow-going. At this rate, gender equality won’t happen for decades.”
The lack of diversity in private markets is frequently discussed. In December, our colleagues at New Private Markets (registration required) spoke to Dave Stangis, chief sustainability officer at Apollo Global Management, who said supplier and board diversity would be a priority area for the firm in 2023. A few days later, Sophie Durham, head of ESG at Igneo Infrastructure Partners, told NPM that diversity is an area where she’d “like to see more progress”. It’s clearly a topic on investors’ minds, and therefore disappointing to see data showing overall progress remains glacial.
Notes from the green room
The Side Letter team spent a bit of time backstage at a few conferences this week, and while what happens in the green room stays in the green room, we did learn one practical thing that we’d like to share. In the prep room at one of the conferences, two high-level PE execs were overheard discussing the challenges of constantly being on the road and how exhausting it can be. Both execs agreed that door-to-door luggage delivery services are the secret to any trip – business or pleasure – where one has to bring more than just carry-on. Luggage Free and Luggage Forward were the two companies the execs swore by. “Really relatively cheap – I don’t understand how they make any money,” said one. So, a little-known industry with a sticky and wealthy consumer base that suffers from pricing inefficiencies. PE target, anyone?