Goldman Sachs flagship private credit fund bucks industry sell-off
Goldman Sachs’ flagship private credit fund has said investors looked to pull less than five per cent of their holdings in the first three months of this year, dodging an industry-wide redemptions wave that has forced some rivals to gate their funds.
The investment bank’s direct lending arm, which functions like a private equity fund but lends directly to companies rather than investing in them, was able to meet all its withdrawal requests in the first quarter, which amounted to 4.99 per cent of its shares, it said in a filing.
The overall redemption rate was still higher than the 3.5 per cent figure the fund managed in the three months of 2025. But unlike many of its major rivals it was able to satisfy all investor withdrawal requests.
Lending giants Apollo, Blackstone and Blue Owl have all been forced to block client redemptions this year, after they were hit by a wave of withdrawals totalling more than the industry-wide five per cent limit.
The quality of loans being issued by major private credit funds has been subject to unprecedented levels of scrutiny in the past six months, after three high-profile corporate failures in Autumn last year were all revealed to have borrowed from direct lenders.
Why is private credit struggling?
Fears around the sector, which is less tightly regulated than its peers in traditional banking, have compounded as investors began to price in the disruptive effect artificial intelligence might have on other sectors. Several of the industry’s largest funds have extended a high volume of loans to fast-growing software as a service (SaaS) firms, many of whose valuations have been rocked by speculation that AI will entirely disrupt their business proposition.
Shares in software giant Salesforce have fallen by more than a quarter since the start of the year, while London-listed software firms Relx and Sage have fallen 14 per cent and 17 per cent respectively. The rotation has been accompanied by growing concerns that AI would wipe out the earnings potential of software firms, eroding their ability to repay their loans.
Nerves have been particularly evident in private credit’s growing base of retail investors, which funds had spent several years courting as an untapped source for growth.
Goldman’s managers attributed its lower redemption rate to the low proportion of retail investors with cash in the fund relative to institutional capital from pension funds, insurance firms and major asset managers.
They wrote: “We have strategically diversified our sources of capital by maintaining an institutionally oriented private credit platform, which means we can be patient, we can pace our deployment at our discretion, and when coupled with our origination ecosystem, provides us with a competitive advantage throughout the credit cycle.”
But the fund also warned it was not immune to the sector-wide slowdown, which saw its annual performance fall from 1.3 per cent last year to 0.4 per cent the same period this year.
“To be clear, we are in the same market as the other non-traded BDCs (business development companies) and we are certainly not insulated from the dynamics of the industry,” they wrote.