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Goldman Sachs scopes out private credit opportunity
by Kathryn Gaw
Opportunities are “everywhere” in private credit, as the dust starts to settle around the software sell-off, according to Goldman Sachs’ co-head of private credit James Reynolds.
Speaking with Lisa Lee on a recent episode of the Credit Exchange podcast, Reynolds said that despite recent negative headlines about private credit, investors are piling into the sector again. He added that these investors have noticed that dispersion in performance is becoming more visible.
“We are seeing lots of momentum in our fundraising with institutions,” said Reynolds. “They understand that this is an interesting moment to step into this market. There’s always a good time to be going into something when others are leaving.”
Goldman Sachs is seeing opportunities in both senior and junior direct lending, capital solutions, and anything around infrastructure, as well as asset-based financing, structured IG and single-name corporate IG private, Reynolds added.
We are seeing lots of momentum in our institutional fundraising
James Reynolds
Co-head of private credit
Goldman Sachs
“On our platform, we’re growing very fast in private IG, in asset-backed finance, in structured IG. That’s a big theme,” he said, adding that the first quarter of this year was the most productive ever for the platform.
Reynolds noted that one thing that gives his platform an edge is its origination capabilities.
“We have been working hand-in-glove with our colleagues and our investment banking friends around the world,” he said. “It’s origination, it’s sourcing, it’s the ability to see the deals early on, to influence the deals, to structure the deals, to have proper access to due diligence.”
Goldman also has the benefit of a large portfolio. The firm’s asset management arm has approximately USD 4tn in AUM, including USD 150bn in private credit. “There is always activity coming out of the portfolio — add-ons, refinancings, change of ownerships,” he said.
While Reynolds is bullish on the opportunities in private credit, he is keeping an eye on market uncertainty, including the possibility of higher inflation and a US recession. In this event, “we have the ability to pause”, he said.
Going forward, he sees alpha coming from avoiding private credit losses, and has observed a flight to quality and scale among global institutional investors.
“Credit is a consistent asset class if done properly with the right kind of discipline in terms of underwriting and risk management,” said Reynolds.
“This is how you create alpha. If you do that consistently, then the returns can be very attractive, especially from a risk-adjusted standpoint.”
