Goldman Sachs, OMERS Launch APAC Private Credit Partnership

Goldman Sachs Asset Management (GSAM) has teamed up with the Ontario Municipal Employees Retirement System (OMERS) to invest in private credit deals across Asia Pacific.

The partnership, a separate account handled by GSAM’s private credit division in Asia on behalf of the Canadian pension fund giant, aims to deploy lending solutions to corporates as well as global and regional lending organisations (‘sponsors’ in industry speak) across APAC, with a focus on the senior direct lending space, according to a statement on Wednesday.

The venture will also explore mezzanine and hybrid lending opportunities as the investment bank’s asset management arm and OMERS look to capture growing demand in the region’s private lending space.

“We see significant demand in the region by companies and sponsors alike, with this mandate we will continue to invest in new opportunities seeking bespoke credit solutions,” said James Reynolds, GSAM’s global co-head of private credit. “We believe our differentiated approach through sourcing and our dedicated on-the-ground presence allows us to position ourselves to best identify investment opportunities that drive attractive risk-adjusted returns.”

APAC as Growth Market

While the two parties declined to disclose capitalisation details for the strategy, GSAM said the effort with OMERS marks the first time that Goldman Sachs Alternatives has raised external capital for such a partnership in Asia Pacific.

GSAM said that its Asia private credit division has an on-the-ground team across multiple markets in the region dedicated to the partnership with OMERS, and that it will also draw upon broader expertise across the bank’s private debt division, which manages more than $100 billion in assets worldwide.

For Toronto-based OMERS, which invests more than $94 billion in net assets on behalf of its pensioners, Asia is seen as a “growth region” for direct lending markets, according to Kal Patel, executive vice president and head of global credit at the pension fund manager.

“Private credit remains an attractive area within the credit space globally, and the expansion of our existing relationship with Goldman Sachs into Asia will position us well to further unlock these opportunities,” Patel said.

The partnership after OMERS appointed Ashish Goyal to the newly created role of executive vice president and head of APAC in April. As of end June, 11 percent of the institution’s portfolio is invested in Asia Pacific.

Private Debt Gathers Steam

Among the sectors where private credit is catching on in APAC is real estate, with borrowers becoming more aware of the strategy, while investors seeing opportunity for higher risk-adjusted returns compared to equity investments as interest rates rise.

“The most popular markets for private credit in commercial real estate include Australia and South Korea as commercial banks have pulled back,” according to Paul Brindley, JLL’s head of debt advisory for the region.

Brindley who relocated from Los Angeles to Singapore nearly two years ago to spearhead the expansion of JLL’s debt advisory business for APAC added that, “Sector-wise, the living and select logistics sectors are certainly the most favoured.”