Goldman eyes credit secondaries amid heightened interest in the strategy

Investing in private debt fund stakes and assets would be a natural extension for the firm, chief investment officer of wealth and asset management Julian Salisbury tells Secondaries Investor.

Goldman Sachs Asset Management‘s next strategy launch may well be in credit secondaries, as the sub-strategy continues to receive attention from buyside firms globally.

In an interview with Secondaries Investor, Julian Salisbury, chief investment officer of wealth and asset management at the New York-headquartered bank, said a credit secondaries fund was “something we’re working on”.

goldman sachs' Julian Salisbury
Salisbury: Credit secondaries will grow from a small base

“We have a traditional private equity fund; we have a real estate secondaries fund; we have an infrastructure secondaries fund; we’re a primary participant in credit funds through our AIMS business. It’s a very natural extension that we would look at credit secondaries,” he said.

While the total addressable market for credit secondaries is likely smaller than that of private equity, secondaries trading in private debt will grow, he added.

“Credit secondaries was practically zero a year or two ago. I suspect it will grow meaningfully as an asset class,” Salisbury said. “I think it will grow a lot from a very small base today.”

Credit secondaries has been a developing area over the past year. Last month, Ares Management and Mubadala Investment Company disclosed a tie-up involving a roughly $1 billion pool of capital for a joint venture focusing on the strategy. The joint venture will focus on both LP stake portfolios of credit funds and GP-led processes.

Apollo Global Management had committed more than $1 billion into equity and credit secondaries over the six months to when it reported its full year earnings in February, while Tikehau Capital in February raised a $300 million collateralised fund obligation backed by cashflows from commitments to its direct lending and private debt secondaries strategies.

Last year, Coller Capital and Pantheon both raised credit secondaries funds, with the former collecting $1.4 billion for Coller Credit Opportunities I and the latter closing on a pair of credit secondaries vehicles.

Credit secondaries deal volume has grown in recent years, accounting for 4 percent, or around $4.4 billion, of total secondaries volume last year, according to data from Greenhill. Five years prior, when the adviser published its volume report for 2017, it did not include deal volume data for private credit funds.

Pricing for credit fund stakes was above average for all asset classes last year, with interests trading at 83 percent of net asset value, compared with 81 percent of NAV for all strategies, according to Greenhill data. By comparison, buyout funds traded at an average 84 percent of NAV.