Big banks are sounding and acting a lot more like private equity.The latest example came last week as Goldman Sachs (GS), one of the oldest and best-known investment banks on Wall Street, repeatedly made clear with actions and words that private markets stand to play a critical role in its future growth — and even how top executives are compensated.The pay component came Friday as Goldman handed CEO David Solomon a retention package of $80 million to stay five more years and an $8 million raise for performance in 2024.Some of that raise came from a decision by Goldman’s board to introduce a retention tool long used by private equity giants: carried interest. Solomon and other executives now can get a piece of the carried interest earned on private funds within Goldman’s asset and wealth management division.The board did so after considering “the unique competitive threats for talent that Goldman Sachs faces, including from alternative management firms and others beyond the traditional banking sector,” the firm said in a filing. Goldman Sachs chairman and CEO David Solomon, in 2023. REUTERS/Brendan McDermid · REUTERS / ReutersAnother reminder of the importance of private markets at Goldman came last Monday when it announced it had combined several groups into one “capital solutions group” that will look to take advantage of the recent surge across Wall Street in so-called private credit, a reference to debt that is not issued or traded publicly.Private credit is a loosely defined market that includes a variety of exotic lending activities. It has mushroomed over the past decade due in large part to higher interest rates and regulation that forced banks to retrench from their own leveraged lending. Private equity firms have stepped in to fill that gap by making loans directly to companies, thereby competing with banks.Solomon said during an analyst call Wednesday that Goldman’s new combined group positions it “to operate at the fulcrum of one of the most important structural trends taking place in finance, the emergence and growth of private credit and other asset classes that can be privately deployed.”Goldman’s approach follows a series of alliances struck last year between traditional banks and alternative asset managers also angling for bigger stakes in the $1.6 trillion private credit market.One prominent private equity boss, Apollo Global Management CEO Marc Rowan, has argued that public and private markets are converging. Both private and public assets carry risks and rewards, he told Yahoo Finance last November, with more companies opting to go private than public. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)”The biggest trend in our industry is investors, individual investors, and institutional investors looking at their fixed-income bucket and saying to themselves, why is this 100% public?” he said in November.Solomon, Goldman’s boss, sounded a lot like Rowan this past week — especially when he spoke to an audie
Lun. Gen 20th, 2025
