Goldman Eyes Fund of Up to $10 Billion to Seize on Market Rout

(Bloomberg) -- Goldman Sachs Group Inc. is looking to build a war chest of as much as $10 billion to put to work as a virus-stricken economy leaves companies desperate for cash to outlast the downturn.

The Wall Street firm, which has the biggest investing platform among its peers, is looking to raise a fund of $5 billion to $10 billion. If the vehicle meets that target, it plans to write checks of a few hundred million dollars and larger, said Julian Salisbury, head of Goldman’s investing division.

“There’s a huge need across our corporate client base,” Salisbury said. “Everyone is drinking from the same fire hose. There’s a long list of companies looking for capital, and we want to be the solution provider.”

A sudden near shutdown of the economy has left distressed firms threatened for survival and even healthy companies in peril. It’s also sparked an opportunity unlike any seen in more than a decade, giving investors a wide range of financing options, with the prospect of promising gains when the world is up and running again.

The Goldman fund will shy away from the kind of bets that could leave it vying for control of a company. Instead, it will focus on channeling its cash into debt-like instruments that have a higher ranking in the capital structure and provide a bridge for companies to get past the economic uncertainty.

The fund’s investing will be shepherded by Tom Connolly and Greg Olafson in a tie-up between the team that runs Goldman’s private credit business and the special-situations group -- a first for that division.

SSG has been known for years as a money-minting machine inside the bank, wagering holdings on the firm’s balance sheet to huge profits. With the bank taking a fresh tack under its new management, SSG will now manage outside capital for the first time ever.

The other half of the team will lean on a group that seized on the last recession through a series of funds that started by investing in companies hobbled by the global financial crisis.

Key Pillar

Expansion of private investing is a key pillar of Goldman’s growth plan, and has been singled out as a critical engine that could help command a higher stock price for the bank. Goldman is looking to raise more client funds and reduce the amount of its own money it invests, a move that would free up capital and lead to greater reliance on management fees.

That plan received a jolt earlier this year, when the two heads of Goldman’s merchant-banking division abruptly quit just weeks after Chief Executive Officer David Solomon touted its significance.

Salisbury, a one-time competitive canoeist and accountant by training, now holds the reins solely, and Rich Friedman, who helped build the division into one of Goldman’s most-profitable groups, is once again playing a more involved role with investments.

JPMorgan has sketched out a similar plan with a target to raise a pool of about the same size. Several credit funds are also seeking capital for new investment vehicles. Blackstone Group Inc. CEO Steve Schwarzman said Tuesday that his firm is “looking aggressively” to put to work $150 billion in dry powder.

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