While many investment banks peers have recused themselves from participating directly in private equity, Goldman Sachs reaffirmed its dedication to the asset class by raising what currently stands as the largest fund to date, the $8.5 billion GS Capital Partners V.
The fund is one of a handful that has pushed the envelope in what what it means to be a mega fund.
The Carlyle Group just raised more than $10 billion (through two funds).
The Blackstone Group is seeking $10 billion as well.
And Thomas H. Lee Partners and Warburg Pincus are each targeting more than $7.5 billion.
Even as most investment banks have withdrawn from the space so as not to step on the toes of some of their best clients (namely the large buyout shops mentioned above), Goldman’s new fund would seem to put the firm directly in the path of its mega-fund rivals.
Goldman launched a $6 billion targeted fund in October. But investor enthusiasm forced the firm to push its target up to $8.5 billion, and the bank was still able to contribute $2.5 billion of that, maintaining its 30% commitment level.
The fund held two closes within 30 days of each other, with the final close occurring last month.
The terms of the vehicle stayed true to industry standards, with an 80%/20% carried interest split. Richard Friedman, a managing director at the firm, said that Goldman will only charge management fees on capital that the firm invests.
This variation largely stems from Goldman’s investor base, which is mostly made up of the bank’s high-net-worth clients rather than the normal institutional limited partners that most mega-funds pursue.
“We didn’t want to raise more than we can invest,” Friedman said. “During the marketing period we observed that the size of opportunities was growing… Most other funds have the big state and corporate pension plans backing them, but our fund is made up of a larger and more diverse group of smaller investors.”
The minimum investment level was set at $5 million, although the firm reserved the right to accept lesser amounts, according to a regulatory filing.
Friedman did not indicate whether the firm did in fact take in investments below $5 million.
The fund will be a global vehicle and will not stray from the firm’s previous strategy. Goldman’s preceding fund committed roughly half of its capital in the United State; 30% to 35% in Western Europe; and the balance in Asia.
Friedman said he anticipates Goldman will commit the capital within the next four to five years.
This story previously appeared in Buyouts, an affiliated publication.