The private lending fund of Goldman Sachs received requests to buy back just under 5% of shares in the first quarter and was able to fully satisfy them, Reuters reports. This sharply contrasts with the situation of other private lending market participants, who faced a sharp increase in requests for withdrawals and were forced to impose restrictions. Market participants are concerned that the development of AI could undermine the business models of software developers who actively use private lending, which could hinder their ability to repay loans.
Details
The volume of redemption requests in Goldman Sachs' private lending fund was slightly below the industry-wide limit of 5% in the first quarter — at 4.999%, reported Reuters and Bloomberg. The fund separately noted in a letter to investors that all its competitors exceeded this figure, claims Bloomberg.
The structure of investors played a significant role: more than 80% of Goldman Sachs consists of institutional clients, which protects it from the problems faced by funds focused on private market participants. In addition, some investors are oriented towards long-term investments and are willing to tolerate limited liquidity, claims a Reuters source.
“Although retail investors and some asset managers are reducing their investments in private lending, we believe that many institutional investors see this change as an attractive entry or re-entry point into this type of asset,” Reuters quotes Goldman Sachs.
Representatives of the fund specifically noted that their asset portfolio is well prepared for the AI era, believing that the impact of artificial intelligence technologies will be multifaceted — both positive and negative for each company.
Context
The private lending sector has come under intense scrutiny from investors due to lending standards and transaction transparency, as well as concerns about the development of artificial intelligence, writes Reuters.
On April 6, the Barings private lending fund reported that it had restricted 5% of withdrawals after investors requested redemption of 11.3% of shares, writes Bloomberg. The fund claims that this step is necessary to balance short-term liquidity needs with prudent capital management for both exiting and remaining investors.
Several large funds, including Morgan Stanley, BlackRock, and Apollo Global, have also restricted withdrawals in recent weeks after a surge in requests from private investors. In early April, Blue Owl announced an increase in the volume of redemption requests from one of its funds from 15% of shares to 41%, after which it also restricted withdrawals. Additional concerns from investors were triggered by individual bankruptcies, for example, the auto loan fund Tricolor, where private lending players were involved, writes Reuters.
Analysts still point to the warning from JPMorgan CEO Jamie Dimon, who in February spoke about the risk of 'new cockroaches' appearing in the private lending industry, although the problem does not currently appear systemic, notes Reuters.
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