Goldman Sachs Resists Redemption Wave in Private Credit Market

Goldman Sachs Asset Management Seeks to Reassure Clients on Private Credit Fund

Goldman Sachs Private Credit Corp. has addressed client concerns regarding redemption rates and software exposure in its retail-oriented private credit fund. As the $1.8 trillion alternative credit industry faces heightened risk of investor withdrawals from retail funds and increased scrutiny over borrowers, the firm has sought to distance itself from its peers.

According to a detailed letter issued by the firm on Thursday, enterprise software exposure in Goldman Sachs Private Credit Corp. was approximately 15.5% at the end of the third quarter, a figure considered to be toward the lower end of industry standards. The fund's fourth-quarter redemption rate of 3.5% was lower than the industry average, and a 7% decline in quarterly inflows was a more moderate decrease relative to peers.

The firm's $188 billion alternative credit assets are predominantly comprised of institutional funds and separately managed accounts, with 17% coming from its US business development company (BDC) complex. The diversified funding sources enable the firm to deploy capital through various market cycles.

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In a bid to shore up confidence, the firm highlighted its underwriting standards, stating that it has not sacrificed these in pursuit of assets. The letter also acknowledged the potential risks associated with artificial intelligence (AI) disruption, but noted that it sees opportunities for companies embedded in mission-critical workflows and those with proprietary data.

The firm's private credit fund has a lower exposure to companies reliant on annual recurring revenue or payment-in-kind interest arrangements, which have been criticized for allowing companies to trade at inflated multiples.