Goldman eyes management-company stakes with new secondaries fund

  • New fund targets $5 bln
  • Vintage VII may back spinouts, management companies
  • Goldman launched fund for management company stakes earlier in 2016

Goldman Sachs may use its new secondaries fund to acquire stakes in private equity management companies, a Minnesota State Board of Investment memo obtained through an open-records request shows.

As with previous funds, Goldman Sachs will use Vintage VII to acquire stakes of PE partnerships on the secondary market. The firm may also use the fund to back new management teams spinning out of larger organizations, as well as stakes in management companies of more mature PE firms, according to the memo.

The latter strategy bears some similarity to Dyal Capital Partners, whose third flagship fund recently raised more than $5 billion to acquire stakes in PE management companies. In May, The Wall Street Journal reported Goldman was raising a separate $1.5 billion fund for the strategy.

“As the private equity industry matures, the secondary market can be a tool to provide strategic capital at the management company level to facilitate generational transitions or growth capital to become a more diversified asset manager,” the Minnesota memo says.

Minnesota committed $100 million to the fund in December. Vintage VII held an interim close on around $3 billion toward its $5 billion target in late June, Private Equity International reported.

Goldman Sachs could not immediately be reached for comment.

The new fund will include at least $170 million from past and present Goldman Sachs employees, the memo says. The fund does not have a key-man provision.

Goldman will charge limited partners a 1.125 percent management fee on their commitments during the fund’s investment period, according to the Minnesota memo. The management fee then falls each year to 75 percent of the previous year’s management fee.

Fund VI, a $5.9 billion 2012 vintage, was netting a 13.8 percent IRR and 1.2x multiple through June 30. The firm’s $5.5 billion 2008 vintage fund was netting a 12.8 percent IRR and 1.5x multiple as of that date.

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A Goldman Sachs sign is seen above the floor of the New York Stock Exchange shortly after the opening bell in Manhattan on Jan. 24, 2014.  Photo courtesy Reuters/Lucas Jackson