Goldman Said to Plan Buyout Fund Wielding Up to $8 Billionby
Firm to contribute small amount of capital under new rules
Some employees may participate, helping align interests
Goldman Sachs Group Inc. is about to start raising money for its first private-equity fund since the financial crisis, potentially gathering $5 billion to $8 billion, according to a person with knowledge of the matter.
The fund won’t be as large as some of the investment bank’s earlier vehicles, and the firm will contribute a relatively small amount of the capital because of post-crisis restrictions on risk-taking by banks, the person said, asking not to be identified because the plans are confidential.
Also in contrast to earlier funds, it won’t carry Goldman Sachs’s name, instead going by West Street Capital Partners, in reference to the firm’s address in lower Manhattan, the person said. Executives expect to close initial fundraising by the end of this year. The Wall Street Journal reported the plan earlier Thursday.
The new fund shows how Goldman Sachs is adjusting to post-crisis regulations including the Volcker Rule. Prior to the 2008 crisis, Goldman traditionally took significant stakes, helping to align its interests with clients. In 2007, Goldman Sachs Capital Partners VI raised about $20 billion, with $9 billion coming from the firm and employees, according to a statement at the time.
The Volcker Rule, named for former Federal Reserve Chairman Paul Volcker, bars banks from owning more than 3 percent of a covered fund. Goldman’s stake in West Street Capital will comply with that, the person said. However, some employees also may contribute, demonstrating confidence in the vehicle, the person said.
Goldman Sachs’s fund investments shrank to $7.76 billion as of Dec. 31, down from $9.84 billion a year earlier, according to annual reports. Stakes in private equity, credit, real estate and hedge funds produced 5 percent of the firm’s total revenue in the past five years and 3 percent of revenue over the past decade, the New York-based firm said in its most recent annual report.
Private equity funds acquire companies, anticipating they can improve profitability and sell their stakes at a profit later on.
Many of the largest U.S. banks have been pulling back from running such operations in recent years. Citigroup Inc. said in 2013 it divested its Metalmark Capital private-equity business and sold its internal hedge-fund unit. JPMorgan Chase & Co. said in 2014 it planned to break off its One Equity Partners unit.