Goldman Sachs raises US$700 million to co-invest with hedge funds

THE asset management arm of Goldman Sachs Group has raised about US$700 million for a new fund that invests side by side with hedge funds and private credit firms.

Union Bridge Partners I, as the fund is known, will work with an external network of managers to allocate the money into their high-conviction ideas, the Wall Street giant said on Thursday (Mar 21). 

The closed-end fund, part of Goldman Sachs Asset Management’s US$340 billion External Investing Group, has already deployed 40 per cent of the capital raised.

“We have seen a significant increase in the opportunity to partner with our external managers to provide flexible capital solutions to companies across public and private markets,” Philip Pallone, who leads the Union Bridge programme, said.  

Co-investments have gained popularity in the hedge fund universe, with a recent Goldman Sachs survey noting that 35 per cent of the respondent hedge fund managers said they provide it as an option to their investors. Driving the trend is a tough capital raising environment for hedge funds, which see co-investment as a way to eke out extra fees.

Goldman raised the capital from investors including institutions, family offices, private wealth clients, alongside “significant commitments” from the firm’s own employees. The fund has already provided capital to companies across North America and Europe in sectors such as hospitality, fitness, software and music, the firm said.

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Goldman’s External Investing Group platform tracks thousands of managers globally and houses some of the firm’s flagship direct alternatives strategies, allowing it to source and execute its investments into the best ideas of those managers. 

Higher interest rates and a retreat by banks from riskier lending have driven a boom in private credit in recent years, and money managers are rushing in to capitalise on that shift. Asset managers, ranging from Man Group to DWS Group, Fidelity International, PGIM and T Rowe Price, have been building out private credit businesses. BLOOMBERG