Goldman Sachs Private Wealth Management (PWM) exceeded its five-year average for annual fundraising in 2022 and significantly increased the number of offerings across different private equity (PE) strategies for clients in Asia.
“We continued to expand our platform and grow our business in Asia in 2022 despite more challenging market conditions,” Lily Chan, head of Alternative Capital Markets Group Asia of Goldman Sachs PWM told Asian Private Banker.
Chan said that the Alternative Capital Markets Group already had a “homerun year” in terms of raising capital in PE over the course of 2021, adding that the number of the firm’s PE offerings has gone up by almost three times over the past 10 years.
The firm has seen a further increase in the penetration rate of clients investing in PE. “We continue to see opportunities for growth in allocations to alternative investments and have tripled our team size in Asia in the past one and a half years,” she said.
Exclusivity
Chan pointed out that the bank negotiates for exclusivity for the majority of partner offerings to bring value to its clients. For instance, almost all its offerings to PWM clients in 2021 were exclusive. And thanks to the bank’s long history in the fund of funds business, it can access and partner with top quartile managers in that space.
“For our team alone, we met with close to 500 managers in 2022,” Chan said.
Apart from external managers, Goldman Sachs also runs its own direct private investing business within Goldman Sachs Asset Management (GSAM), which differentiates the bank’s offerings from its peers. For example, GSAM has its own private-equity secondary strategy, GP stake investment strategy and GP seeding investment strategy.
Manager selection is key
Even with a strong pipeline, Chan noted that manager selection is crucial for Goldman before it onboards any new strategy.
We believe in generating outperformance for clients through manager selection.
“When you look at performance, the internal rate of return (IRR) discrepancy between the top and bottom quartile players could be 15% for buyouts and 18% for venture in the past 15 years, so it’s crucial that we help our clients get access to top-quality managers,” she explained.
“Our clients are sophisticated investors and most of them would have direct access to well-known GPs [general partners] in the market. Our approach is to provide our clients access to the top-quartile managers that don’t have a broad private wealth LP [limited partner] base.”
Cautious on semi-liquid
Semi-liquid strategies in alternative investment have gained exceptional interest from private banking clients, but the recent bombshell of Blackstone’s flagship semi-liquid strategies facing pressures from clients asking for redemptions has prompted a question for many private banks: Are semi-liquid strategies a safe option for investors?
Goldman Sachs PWM is taking a more cautious view when it comes to semi-liquid strategies.
“We have historically been more deliberate than competitors in offering products with semi-liquid private structures,” Chan said. She added that the firm only has a few semi-liquid offerings on the shelf and the recent significant redemptions across a number of semi-liquid products in the market have not had an impact on its business.
“We have always focused on partnering with top quality, close-end private equity funds with solid historical track records, instead of funds that provide the best liquidity terms. We believe in generating outperformance for clients through manager selection.”
Traditional private equity investing enables clients to capitalise on liquidity premiums and enjoy greater diversification, she said.
Rising liquidity needs in 2023
In the past couple of years, Chan said clients have tended to focus more on growth strategies, particularly growth managers that specialise in tech. However, over the past 12 months in particular, clients have sought opportunities in the secondary market, with more indicating, because of rising interest rates and inflation, that they wanted to look at distressed strategy managers and real estate strategies.
“Amid a challenging market, we continue to see clients with increasing liquidity needs. At Goldman Sachs, we have an in-house private equity secondary platform that aims to match potential buyers and sellers to execute private-equity limited partnership transactions across our global private wealth client base,” said Chan.
She noted that the bank will continue to provide clients with an open architecture platform for offerings while providing bespoke advice on portfolio construction and risk management.
“We have been focusing on local origination for local needs, so while we look at our global pipeline we do put significant effort into sourcing offerings locally.”
