Goldman Sachs Launches Private Credit Product for Retirement Accounts with 1% Fee.

Goldman Sachs is launching a private credit product for U.S. retirement plans, structured as a collective investment trust (CIT). The product, GS Private Credit CIT, will offer exposure to private credit funds, including North American and European direct-lending investments and private placements. Goldman Sachs will charge clients a fee of about 1% of assets, including administrative costs. The firm plans to launch the product in the fourth quarter of this year.

Title: Goldman Sachs Introduces Private Credit Product for U.S. Retirement Plans

Goldman Sachs Asset Management (GSAM) is set to launch a new private credit product, the Goldman Sachs Collective Trust – Private Credit Fund (GS Private Credit CIT), specifically designed for U.S. retirement plans. The product aims to bring alternative investments into retirement portfolios, capitalizing on a period of loosening regulation and evolving market dynamics.

The GS Private Credit CIT will offer exposure to a broad mix of private credit investments, including North American and European direct lending and private placements. The fund is structured to provide daily liquidity, making it suitable for use in target date funds, multi-manager bond funds, and managed accounts within retirement portfolios. This innovation is part of a broader industry trend to introduce alternative investments into retirement plans.

According to Greg Wilson, global head of retirement at GSAM, the new fund is designed to meet the practical needs of retirement plans. By combining the firm's scale and long history in private credit with its extensive experience in the defined benefit and defined contribution spaces, GSAM aims to deliver attractive investment opportunities in an accessible format for the defined contribution market.

The GS Private Credit CIT is expected to launch in the fourth quarter of this year. Goldman Sachs will charge clients a fee of about one percent of assets, inclusive of administrative expenses. This move comes as part of a broader industry effort to introduce alternative investments into retirement portfolios, driven by evolving regulations and the shrinking universe of public market opportunities.

The launch of the GS Private Credit CIT is part of the Panorix Target Date Series developed by Great Gray Trust Company in collaboration with institutional managers. The series will blend a custom glidepath from BlackRock with liquidity and cashflow management from Wilshire Advisors, as well as private equity offerings from BlackRock and the new private credit fund from GSAM. This combination is intended to bring investment capabilities previously available mainly to institutions into the defined contribution space.

While the introduction of private credit into retirement plans offers potential benefits such as higher historical returns and greater flexibility, it also raises concerns about risks and regulatory scrutiny. Policymakers and industry analysts have debated the opacity and interconnectedness of private credit with the broader financial system, as well as the potential for overly optimistic credit ratings reminiscent of those that contributed to the 2008 financial crisis.

Despite these challenges, Goldman Sachs has argued that private credit offers higher historical returns than traditional public credit markets, with loss ratios that are similar or lower. The firm believes that private credit will continue to evolve in a complementary fashion to public credit markets, with larger borrowers preferring public financing options and smaller borrowers benefiting from a bespoke approach.

The launch of the GS Private Credit CIT is a significant step in the industry-wide effort to bring private assets to retirement accounts. It follows a series of announcements and collaborations, including Blue Owl's partnership with Voya and Apollo's collaboration with State Street, which are all driven by the desire to expand investment options for retirement plans.

References
[1] https://www.barrons.com/articles/goldman-sachs-private-credit-retirement-plan-launch-db3ca8f5
[2] https://www.investmentnews.com/retirement-planning/goldman-sachs-brings-private-credit-to-defined-contribution-plans/261382
[3] https://www.wealthmanagement.com/alternative-investments/goldman-sachs-launches-a-private-credit-cit-for-dc-plans