Fire sale UK plc: Goldman Sachs to snap up British assets on the cheap as panicky UK pension funds flee
In a near-unprecedented rush by British pension funds to raise their cash holdings, Goldman Sachs and a range of other investment giants are planning to snap up UK assets at discounts of up to 30 per cent.
Since Kwasi Kwarteng’s disastrously received mini-budget at the end of September, UK pension funds are rushing to improve their cash holdings by selling liquid assets.
Kwarteng’s mini-budget caused outright panic in the gilts market, which forced the Bank of England to step in.
Despite the Old Lady’s intervention, pension giants are now planning to put a range of illiquid assets on sale, including private credit, property and stakes in buyout vehicles, according to various reports, including the Financial Times.
“We’re seeing discounts of 20 to 30 per cent for a high quality portfolio [of stakes in private equity funds],” Gabriel Möllerberg, a managing director at Goldman Sachs Asset Management, told the FT.
“It’s absolutely an opportunity,” Möllerberg stressed.
In addition to Goldman Sachs, other investors, including Blackstone, have the fire-power to buy pension fund holdings trading at below face value prices.
City A.M. understands Blackstone currently have no plans to do so.
Wave of takeovers
The transactions are usually negotiated and agreed privately and may take up to several months to close but investors are convinced the City can expect a wave in the final months of this year, the FT wrote.
“In these market conditions, you get very attractive buying opportunities,” according to Ross Hamilton at Switzerland-based private equity firm Partners Group, which buys pension schemes’ private fund stakes.
“We’ve got dry powder of over $9bn . . . it’s an exciting opportunity for us,” Hamilton told the paper.
Most British pension funds zoomed in on illiquid assets as they were keen to pump funds into investments that returned higher yields.
Many pension funds moved into illiquid private markets in search of higher yields during a decade of low interest rates. However, that tide turned drastically earlier this year.
“There’s a cold wind blowing for more illiquid assets,” concluded David Lloyd, fund manager at M&G, in the FT.
He stressed pension schemes are bracing themselves for cash demands from buyout groups whose funds they used to finance takeovers in recent years.