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Goldman Sachs Raises $10.3 Billion to Acquire Buyout Stakes

Melissa Karsh
·3 min read

(Bloomberg) -- Goldman Sachs Group Inc. raised $10.3 billion for a new fund that will primarily buy private equity stakes as interest in such deals intensifies.

Harold Hope, Goldman’s global head of secondary investing, said the fund is his group’s largest and includes about $250 million of internal capital. It will be used to acquire holdings owned by existing fund backers and stakes that buyout firms may want to spin off into new vehicles, an area that Hope calls “non-traditional” deals.

“We’re allowing existing private equity managers to have another go around at that asset, and not have to sell it to someone else before they are ready,” Hope, who joined Goldman Sachs in 1999, said in an interview.

Wall Street firms are building secondaries businesses as investors seek liquidity and to mitigate the risk of traditional buyout funds. Brookfield Asset Management Inc. and TPG are among firms pushing into the market with such transactions gaining traction even as deal volume has slid in the pandemic. There were a record $85 billion in secondaries deals last year, according to research from Coller Capital.

In secondaries, firms buy portfolios of funds from investors who need cash or want to rebalance their holdings. Private equity managers also turn to the market to hold onto a company while providing an exit for investors.

Goldman’s new fund is the firm’s eighth in this business. It’s 43% larger than the $7.2 billion pool raised in 2016. The firm has committed almost $40 billion in its secondaries strategies since the group’s founding.

The New York-based firm invests across fund strategies, including buyout, growth, venture and infrastructure. It will mostly target funds focused on the U.S. and Europe, with the remainder in emerging markets and parts of Asia. As much as 10% of the fund will focus on real estate, according to Hope.

In the second quarter, Goldman’s secondaries group took advantage of dislocations spurred by the Covid-19 crisis to invest $900 million of capital from the fund, up 40% from the year-earlier period, Hope said. The firm has been buying defensive assets such as technology, infrastructure and health care companies -- sectors that have bounced back, showing their stability, he said.

The fund is about 20% invested into deals. In November, Goldman, which started its secondaries business in 1998, led investors in a transaction that enabled Clearlake Capital to shift Ivanti, a provider of IT management and security software solutions, into a new separate fund. The firm led a similar deal in July that let Riverstone Holdings LLC move renewable energy firm Enviva Holdings into a new vehicle.

Hope said he expects more players to do more transactions.

“The reason you’re seeing larger and larger funds is really because the secondary market has grown so quickly and it’s so concentrated among a number of established buyers,” Hope said. Given the deal volume, “the selling opportunity is greater than the capital there is to buy it.”

(Updates sixth paragraph with details on Goldman’s backing of secondaries. An earlier version of the story corrected the spelling of a company name in the ninth paragraph.)

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