The strategy: Goldman Sachs is forming a new division, the Capital Solutions Group, to finance mega deals and offer loans to corporate clients, per Reuters. This move aims to increase its share in the lucrative $2 trillion private credit market.
How we got here: Nonbanks have dominated the private credit market, as they face fewer regulations in a potentially riskier environment, per Deloitte.
Goldman Sachs CEO David Solomon said private credit and equity are in high demand from its investing clients, per Reuters. And it isn’t the only financial institution (FI) to notice the trend—Citigroup and Apollo Global joined forces on a $25 billion private credit and direct lending program.
The plan: In addition to partnering with alternative-investment firms like its competitors have done, Goldman will work with institutional investors to fund corporate loans, per The Wall Street Journal.
Specifically, Goldman is combining its financial sponsors team, global financing group, and parts of its fixed-income division to build the Capital Solutions Group, per Capital Brief. It’ll also expand its alternative-investments team to better meet the growing demand.
Can it work? Goldman Sachs is one of the first major banks to make a strategic play in the booming private credit market. This move not only enhances its competitive edge but could also set a precedent, encouraging other large financial institutions to follow suit.
As the demand for private credit surges, banks that haven’t adapted to this rapidly growing sector may need to reconsider their strategies or risk falling behind in a crucial market segment.
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