Goldman Sachs (GS.N) and Abu Dhabi’s sovereign wealth fund Mubadala announced a $1 billion deal on Monday. They have agreed to co-invest in private credit across the Asia Pacific through a separately managed account.
Both companies will collaborate in various Asia Pacific markets in this partnership, explicitly focusing on India. The deal highlights their commitment to investing in private credit opportunities in the region.
“Some of the investors might be underpenetrated across private credit in general, and they are looking at getting more exposure across this asset class,” James Reynolds, the head of direct lending at Goldman’s money management unit, said in an interview. “That’s where partnering with these powerful institutions creates a win-win.”
Over the last five years, the private credit market, valued at $1.7 trillion, has more than doubled in size. Investors have been drawn to this asset class due to its potential for higher returns. It has evolved into a consistent investment category for pension funds, endowments, and sovereign wealth funds, emerging as a significant funding source for companies and private equity firms.
For years, investors in the Middle East exhibited limited interest in private debt because of its low yields compared to their return objectives. However, a change in sentiment is underway, attributed to the recent increase in interest rates and the market’s overall expansion.
Mubadala and the Abu Dhabi Investment Authority have formed partnerships to enhance their market presence. Additionally, firms like Blue Owl Capital Inc. and Hayfin Capital Management are expanding in the region to attract more business.
While North America and Europe are saturated with numerous private credit firms lending directly to companies, especially in leveraged buyouts, the Asian Pacific market is less developed. Goldman Sachs stands out as one of the significant private credit players actively expanding in the region. Som Krishna is crucial in overseeing the asset management unit’s credit business in Asia.
“What these markets need is a blossoming, growing private equity industry,” Reynolds said. “We want to partner up with investors who want to have Asia exposure, and they want to go with a platform that has experience and track record.”
There has been a notable increase in private credit collaborations in the Middle East over the past year. Barclays is actively working on a partnership with AGL Credit Management, with initial capital support from the Abu Dhabi Investment Authority. Meanwhile, Mubadala has finalized agreements with Ares Management Corp. and Blue Owl.
Mubadala, boasting approximately $300 billion in assets under management and ranking among Abu Dhabi’s three primary sovereign wealth funds, aims to double its presence in Asia by 2030. This strategic move is geared towards leveraging faster-growing economies and enhancing the diversification of its investment portfolio.
Goldman Sachs manages around $110 billion in private credit assets and plans to double this figure in the coming years. To achieve this target, the firm has appointed Greg Olafson as its new global head of private credit and promoted Reynolds to his current role. This strategic move reflects the firm’s commitment to expanding its footprint in the private credit market.
“The diverse and rapidly growing economies, as well as the increasing private-equity deal volumes, are significantly driving demand in Asia Pacific for customized credit solutions from non-traditional lenders,” Omar Eraiqat, deputy CEO, Diversified Investments at Mubadala, said in a statement.
