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Goldman Sachs is planning to list its Petershill Partners unit in a deal that would value the Wall Street bank’s alternative assets business at more than $5bn, according to people familiar with the situation, amid a global boom for private equity.
Petershill, which owns minority stakes in 19 alternatives firms with a combined $187bn of assets under management, said on Monday that it is considering an initial public offering on the London Stock Exchange. A flotation would give public market investors exposure to its performance and make it the largest listed alternatives business in London.
When Petershill was set up in 2007, it was the first of a series of groups created to take stakes in private equity and alternative investment managers, seeking to benefit from the recurring revenue streams of management and performance fees that they generate. Other players in this space include Dyal Capital, Blackstone’s Strategic Capital Holdings and AlpInvest Partners.
The planned Petershill IPO is further evidence of Goldman Sachs chief executive David Solomon’s determination to grow the US bank in areas that earn regular fees, such as asset and wealth management, while reducing its reliance on volatile businesses such as equities and bond trading. Last month it bought the asset management arm of Dutch insurer NN Group for €1.6bn.
Investors have been increasing their exposure to private equity and private debt in a search for returns in an environment of low interest rates. Assets in the overall alternatives industry are expected to grow at a compound annual rate of 9.8 per cent, from $10.7tn in 2020 to $17.2tn by 2025, according to data provider Preqin.
Petershill’s earnings distributable to partners have more than doubled from $108m in 2018 to $243m in 2020, and reached $310m for the 12 months to June 30, according to the expected “intention to float” document.
Its 19 minority investments in alternative firms were previously held in funds managed by Goldman Sachs Asset Management. Petershill’s holdings include Caxton Associates, one of the world’s oldest and best-known hedge funds, Ross Turner’s Pelham Capital and technology buyout firm Accel-KKR.
If it goes ahead, the IPO plans to raise $750m by issuing new ordinary shares, and separately will also sell existing ordinary shares to achieve a free float of 25 per cent, the document said. The listing is set to value the entire business at north of $5bn, the people said.
The company has appointed an independent board led by chair Naguib Kheraj, the former Barclays finance director who is also chair of specialist pensions insurer Rothesay Life and deputy chair of Standard Chartered.
In its 14-year history Petershill has raised and deployed $8.5bn of capital across a broad range of strategies including private equity, private credit, private real assets and absolute return.
About four-fifths of Petershill’s assets are in private markets managers, and the remainder in hedge fund strategies. The majority of new acquisitions are expected to be in private capital managers, and it is targeting strategies including technology, healthcare and ESG that are likely to find opportunities as the world emerges from the pandemic.
Ali Raissi, co-head of the Petershill group, said in a statement that “this IPO would be a natural next step in the evolution of the offering to partner firms, establishing a permanent capital source, and demonstrating long-term strategic alignment and partnership”.
Robert Hamilton Kelly, co-head of Petershill, said in a statement that the deal “would provide shareholders with access to the growth and profitability of the alternatives industry” and give investors exposure to “the economics of a highly cash-generative company that benefits from stable, long-term fee-related earnings delivered by high-performing firms, based on long-dated assets”.
The Financial Times reported last month that the five biggest listed US private capital companies had more than tripled in combined value since the depths of last year’s market sell-off, as investors have sought to benefit from the hefty fees they rake in from the boom in unlisted assets.
In July, UK-based Bridgepoint Advisers raised £300m in another London IPO and the stock of the buyout group has risen 12 per cent since.