Goldman Sachs is shouting (and acting) like private equity
Big banks are clamoring and acting more like private equity.
Goldman Sachs (GS), one of the oldest and most prominent investment banks on Wall Street, made clear in action and words last week that private markets will play a critical role in its future growth — and even how its CEOs are paid.
Part of the payment came Friday when Goldman gave David Solomon a retention package of $80 million over five more years and $8 million for performance in 2024.
Some of these increases resulted from Goldman’s board’s decision to introduce a long-term holding instrument used by private giants: carried interest. Solomon and other executives now have access to a piece of the carried interest earned by private funds in Goldman’s asset and wealth management division.
The board did so after considering “the unique competitive risks of Goldman Sachs’ capabilities, including alternative management firms and others beyond the traditional banking sector,” the company said in a filing.
Another reminder of the importance of private markets by Goldman came last Monday when he announced his presence It has combined several groups into one “Capital Solutions Group”. This refers to private credit, debt that is not issued or publicly traded, which has recently appeared on Wall Street.
Personal lending is a loosely defined market that includes a variety of specialized lending activities. Over the past decade, high interest rates and regulations have forced banks to withdraw from their own loans, which has mushroomed. Private equity firms have stepped in to fill this gap, competing with banks by lending directly to companies.
Salomon said during an analyst call on Wednesday that Goldman’s new combined team “has positioned it to operate in some of the most important structural trends taking place in finance, the emergence and growth of private credit and other privately deployable asset classes.” “
Goldman’s approach follows a series of tie-ups between traditional banks and alternative asset managers over the past year as they seek to gain a bigger stake in the $1.6 trillion private credit market.
One prominent private equity boss, Apollo Global Management CEO Mark Rowan, has argued that the public and private markets are converging. Both private and public assets carry risks and rewards, he told Yahoo Finance last November, adding that many companies are choosing to go private rather than public. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
