Ontario Municipal Employees Retirement System has formed a partnership with the asset management arm of Goldman Sachs Group to invest in private loans in Asian and Pacific markets, as investors race to grab a share of the burgeoning global market for private debt that has grown more lucrative with rising interest rates.
Under the partnership, Goldman Sachs Asset Management will run a separately managed account where it will invest with OMERS, mostly offering senior direct loans to highly rated companies and sponsors, but with an option to invest in other strategies such as mezzanine debt. Neither the size of the fund nor OMERS’s contribution were disclosed.
Institutional investors see private debt as an area of huge opportunity in the coming years. Most private loans are floating rate, meaning the returns rise in step with interest rates. And demand for the loans has exploded as some banks, particularly in the United States, have tempered their appetite for lending to mid-market companies, constrained by tougher market conditions and onerous regulatory capital requirements.
Investors with money to deploy in private credit are also increasingly partnering with banks, which have broad relationships and distribution networks, to roll out private credit funds.
Brookfield Asset Management Ltd. partnered with French bank Société Générale S.A. to launch a new €10-billion ($14.3-billion) private debt fund earlier this month. And New York-based alternative investment manager Centerbridge Partners said Tuesday it is joining with California-based bank Wells Fargo & Co. on a new direct-lending strategy, with British Columbia Investment Management Corp. and subsidiaries of the Abu Dhabi Investment Authority as anchor investors.
Major Canadian pension plans and asset managers are building up their private credit businesses, and OMERS’s partnership with Goldman Sachs allows it to tap the bank’s Asian private credit team, which is a subset of a broader direct lending team that manages more than US$100-billion. Its investments focus on India, China, Korea, Japan and parts of Southeast Asia, as well as Australia and New Zealand.
Asia is a region where OMERS plans to expand its presence, Kal Patel, OMERS’s head of global credit, said in a statement. “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.”
Earlier this week, Goldman Sachs announced it has appointed Stephane Amara as the new head of its Canadian institutional client business. Mr. Amara will be based in Montreal, and most recently led institutional sales for MFS Investment Management.