Goldman Sachs Group’s asset management division has achieved a milestone by accumulating over $15 billion across funds exclusively dedicated to acquiring private fund stakes on the secondary market, a thriving segment that continues to attract substantial capital despite a broader slowdown in fundraising.
According to a recent statement, the bank’s alternatives arm, which oversees approximately $45 billion in capital dedicated to secondary investments, has secured $14.2 billion from investors for its Vintage IX strategy to acquire stakes in private equity funds from fellow investors.
Furthermore, Goldman gathered an additional $1 billion for Vintage Infrastructure Partners, its debut commingled fund designed to acquire stakes in private infrastructure vehicles.
Both initiatives surpassed their target levels, buoyed by commitments from high-net-worth individuals and institutional investors.
Harold Hope, Managing Director and Global Head of Secondaries at Goldman Sachs Asset Management emphasized the appeal of secondaries as a strategy for investors with available capital.
He stated that investors perceive the current opportunity set in the secondary market as unprecedented, offering a viable avenue within private markets to deploy capital effectively.
Institutional investors in private-market funds utilize the secondary market to sell their stakes, generating necessary liquidity.
Moreover, the secondary market presents an avenue for fund sponsors to prolong their hold on companies they are unable or unwilling to sell while providing investors in their funds the opportunity to liquidate their positions.
Data from private markets researcher Preqin reflects a surge in institutional investor interest in secondary strategies over the past year.
By the second quarter of this year, 28% of these investors expressed plans to target secondary strategies over the ensuing 12 months, up from 19% in the preceding year.
This increase in interest comes as the rapid pace of secondary deals witnessed a downturn this year. Secondary-market trade volume dropped by 25% to $43 billion in the first half of the year compared to a record $57 billion during the same period last year.
Although a persistent gap in pricing expectations and challenges due to stock market volatility and rising interest rates have impacted the market, the outlook remains positive.
Many fund managers and investors anticipate an upswing in activity, especially as traditional liquidity sources like mergers and acquisitions and initial public offerings remain subdued.
As evidenced by dedicated vehicles like Vintage, Goldman’s strategic focus on secondary investments in infrastructure and real estate funds further enhances the firm’s market presence and positioning as a go-to partner for secondary market deals.
With a significant increase in sourcing infrastructure secondary deals and growing global interest from institutional investors, Goldman Sachs Asset Management’s foray into the secondary market signifies a robust approach to navigating evolving financial landscapes and investor demands.