Goldman Sachs to raise USD 8 bn for new buyout fund: sources

Hon Kong: Goldman Sachs Group Inc plans to raise USD 8 billion in only its second buyout fund since the 2008 financial crisis, bolstering its ability to secure deals worldwide, said two people with direct knowledge of the matter.

Undeterred by a coronovirus epidemic in China that has cast a shadow over the global economy, the Wall Street heavyweight will kick off the fundraising next week via its private equity arm West Street Capital Partners, said the people.

The fast-spreading virus is not seen as a hurdle to the fundraising as the bank is mainly targeting offshore, non-Chinese prospective investors, said one of the people.

It is aiming for a first close by the end of March - an important milestone indicating the fund has crossed a minimum threshold and can begin making investments, said the other person.

The new fund, substantially smaller than Goldman’s biggest fund of USD 20 billion in 2007, underscored its commitment to the private equity business. Many banks, including Citigroup Inc and JPMorgan Chase & Co, have spun out or divested their private equity arms in recent years following the adoption of the Volcker Rule, which limited banks from investing their own balance sheets in funds.

Private equity firms have also been raising record amounts of capital globally, with Blackstone Group, the world largest alternative asset manager, last year raising a record USD 26 billion for its latest buyout fund.

Goldman’s new fund will focus on deals where it gets majority control, with the goal of deploying 60 per cent of the capital in America, said the first person. It also plans to make about 25 investments in various sectors, with the deal size ranging between USD 150 and USD 600 million.

Like its last fund - West Street Capital Partners VII that raised about USD 7 billion in 2017 - the new fund will seek capital from both intuitional investors and the bank’s own employees, said the person.

Goldman didn’t respond to a request for comment. The sources declined to be identified as they were not authorized to speak to the media.

Goldman’s private equity arm, established in 1986, has been managed by its merchant banking division. It has raised about USD 47 billion since inception across eight funds, according to industry data provider Preqin.

In 2016, the arm was named West Street Capital Partners, after Goldman’s New York City address, to comply with a post-crisis rule that does not allow private equity funds to bear the parent bank’s name.

It has generated a net internal rate of return (IRR), which deducts management fees, fund expenses and carried interest, of 19 per cent, since 2000, according to the first person.

Its last fund has made investments including the USD 2.7 billion buyout of eye-care manager Capital Vision Services in 2019 and joined energy-focused peer Riverstone Holdings in the USD 1.6 billion acquisition of Lucid Energy Group’s Delaware Basin unit, showed Preqin data.