Goldman Sachs closes on $15.2bn mezzanine vehicle

A new fund in a 26-year-old series focuses on North American corporates.

Goldman Sachs Asset Management closed on West Street Mezzanine Partners VIII, the latest in a series of flagship mezzanine funds. It launched the series in 1996.

The fund, managed by GSAM’s private credit business, opened in March 2022 per PDI data. Focusing on North American corporates, it has now closed on $11.7 billion of equity. With the expected long-term asset financing included, GSAM’s statement said the number comes to $15.2 billion.

A variety of investors were involved, both high-net-worth individuals and institutions. There was also a commitment from Goldman Sachs and its employees. “We are deeply appreciative of the support from existing and new limited partners,” said Julian Salisbury, chief investment officer for asset and wealth management at Goldman Sachs, in a statement announcing the closing.

The company declined to make its target public, though an informed insider did say the closing surpassed the target.

The predecessor, Mezzanine Partners VII, closed in 2018 at $13 billion.

Over the past 26 years, GSAM has raised more than $160 billion for commitments in private credit. It has invested $53 billion of this in mezzanine strategies. Mezzanine Partners VIII in particular has thus far invested or committed about $4 billion across 13 portfolio companies.

Mezzanine Partners VIII will follow the strategy of its predecessors: the series focuses on direct origination of junior fixed income issuances from private equity backed businesses.

GSAM has total assets under management of $2.43 trillion, according to PDI data.

Amanda Lynam, a former Goldman senior credit strategist who left the firm in 2022, said in 2020 that the reversals that year amounted to the “first economic downturn” in the history of the asset class. In an analysis that will likely seem pertinent as 2023 unfolds, she said: “Direct lending performance has actually proved remarkably resilient compared to the public markets,” allowing it to outperform its public high-yield peer set.

The resilience comes in part, she said, from the fact that investors value the “smoothness” of returns. Private lending results in lower observed volatility than its peers.