Goldman Sachs, Mubadala Launch $1B APAC Private Debt Partnership

Goldman Sachs and Abu Dhabi’s Mubadala Investment Company have established a $1 billion partnership to invest in private debt opportunities across Asia Pacific, including real estate, in a bid to plug a financing gap left by traditional lenders.

The partners will be co-investing through a separate account managed by the US investment bank’s asset management division to provide customised private debt solutions to companies and their shareholders throughout Asia Pacific, with a special focus on India. Goldman Sachs and the Abu Dhabi sovereign investor announced the strategy on Monday with sources confirming that the vehicle’s mandate includes the real estate sector.

“The opportunity in private credit in Asia Pacific is expansive,” said Greg Olafson, global head of private credit at Goldman Sachs Alternatives. “With strong economic growth in the region and favourable conditions for private lenders to support the growth of leading companies by providing flexible, long-term capital, we believe we are at the early stages of a defining era for private credit in Asia Pacific.”

With higher interest rates boosting returns on credit strategies at the same time that investors struggle to source equity financing, Goldman Sachs Asset Management, the investment bank’s third-party capital division, announced in September that it had entered into a separate private credit partnership with Canadian pension fund manager the Ontario Municipal Employees Retirement System (OMERS) targeting Asia Pacific.

Billion Per Strategy

The private credit division of Goldman Sachs Alternatives, a unit of Goldman Sachs Asset Management (GSAM), will be managing the billion-dollar mandate with a dedicated on-the-ground team across multiple markets in the region. Globally, the firm has 165 members in its private credit team overseeing more than $110 billion in assets, according to the statement.

For Mubadala, which in the statement said it has a portfolio of $276 billion, the tie-up with Goldmans Sachs is the latest in a series of private credit commitments in Asia Pacific and worldwide.

“This partnership with Goldman Sachs compliments our aspirations to grow our private credit exposure in APAC, a region that is central to Mubadala’s strategic growth initiatives,” Omar Eraiqat, deputy CEO of diversified investments at Mubadala said in the joint statement. “The diverse and rapidly growing economies, as well as the increasing private equity deal volumes, are significantly driving demand in Asia Pacific for customized credit solutions from non-traditional lenders.”

The Abu Dhabi fund, which ranked third among sovereign investment vehicles globally last year with $17.5 billion in capital deployed (one spot ahead of cross-Emirate rival Abu Dhabi Investment Authority’s $13.2 billion) in October 2022 set up a $1 billion partnership with KKR to invest in private credit opportunities in Asia Pacific, with India also among the countries targetted under that strategy.

As 2023 opened Mubadala announced a joint venture with Alpha Dhabi Holding, the UAE’s third largest public company, to invest $2.5 billion over the ensuing five years through an Apollo Global Management private credit platform anchored by the sovereign fund.

Then in March of last year Mubadala said it had set up a partnership with Ares Investment Corporation to co-invest $1 billion in secondary market private credit opportunities, with the sovereign fund committing another $1 billion to a Blue Owl Capital credit platform in September, followed by a December announcement of a $1 billion real estate private credit vehicle with Ares and UAE developer Aldar.

Asia in Mind

With Goldman Sachs having last year added an office in Hyderabad to its existing locations in India, Mubadala appears to be adding the subcontinent to its list of global private credit strategies.

“India, in particular, stands out as a key market with significant opportunities in private credit, and where Goldman Sachs has strong exposure and capabilities,” said Fabrizio Bocciardi, head of credit investments at Mubadala.

In an interview last month Mubadala’s head of life science and healthcare investments Camilla Macapili Languille said the fund as a whole is underinvested in Asia and that it plans to boost its assets under management from 12 percent of its portfolio currently to 25 percent by as soon as 2030.

Filling a Funding Gap

On the real estate side, an ongoing liquidity crunch in some Asia Pacific markets is creating opportunities for global private lenders, according to Rachel Heng, director of APAC debt advisory at JLL.

“The commercial real estate sector is an active market for private lenders,” Heng told Mingtiandi in response to queries following the announcement of Mubadala’s tie-up with Goldman Sachs. “Compared to 18 months ago, the market is now more aware of the financing options available. Banks have also started to rationalise their exposures and are pulling back when necessary, [they] are also now more cashflow driven.”

Heng said private lenders see the greatest opportunities in markets where the financing gap is largest, particularly in developed nations where lenders may be protected by more robust legal regimes. These prime targets include South Korea’s logistics sector, as well as the office markets in Australia and Hong Kong, as equity investment begin to look more shaky.

“The appeal of the debt market stems from its position higher up the capital stack. It also provides a higher adjusted risk return compared to being an equity investor,” Heng said. “Clearly, private debt within Asia Pacific’s real estate market will continue to develop and mature.”

Property heavyweights in the region are also preparing to profit from the shift to private debt, with Singapore’s Keppel Ltd having taken full control of private credit specialist Pierfront Capital Fund Management in October of last year.

Private credit is also among the target strategies for Gaw Capital Partners Gateway Real Estate Fund VII which closed on $3 billion in commitments in July 2023.