Goldman Sachs’ $14 bn credit fund draws $260 mn from Korea

South Korea’s Police Mutual Aid Association (PMAA) and financial services firms, including Samsung Securities Co., have committed $260 million in aggregate to Goldman Sachs’s new credit fund reportedly seeking to raise up to $14 billion, according to sources with knowledge of the matter on Nov. 26.

The investment vehicle, called West Street Strategic Solutions Fund I (WSSS I), is anticipated to be Goldman Sachs’ largest fundraising since it launched a $20 billion private equity fund in 2007.

The fund targets 15-18% in a gross internal rate of return over the investment period of three years, which can be extended by up to two years, first reported by the Seoul Economic Daily and later confirmed by sources.

On top of its high target return, WSSS I grabbed the attention of Korean investors focusing on big-name funds, or re-upping for follow-on funds, given the difficulty of conducting on-site due diligence on overseas assets in the extended pandemic era, the sources said.

Excluding PMAA and Samsung Securities, Korean limited partners in the credit fund are largely made up of insurance companies — Shinhan Life Insurance Co., ABL Life Insurance Co., DB Insurance Co., DB Life Insurance Co. and DGB Life Insurance Co. based in the city of Busan —as well as Preedlife Co., a membership-based funeral service provider.

Details of their individual investment amount were not yet disclosed.

Goldman Sachs is expecting to finish the fundraising at $14 billion, Bloomberg reported last month.

WSSS I will focus on M&A funding, secured senior debt and unsecured subordinated debt to large- and middle-market companies in sectors ranging from consumer goods, technology, healthcare, energy and real estate to manufacturing and financial services in North America, Europe and Asia.

The fund began its investment by lending $1.2 billion to American Airlines, which put up as collateral its “American Airlines” trademark and “aa.com” domain name in the US and foreign countries, as well as certain take-off and landing slots at New York’s LaGuardia Airport and Arlington's Reagan National Airport.

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This year, global private debt funds have raised around a combined $1 billion from Korean institutional investors who chose private debt as their first choice of where to raise exposure in pursuit of a steady income stream, according to a survey by The Korea Economic Daily.

More than half of the respondents picked direct lending as their top credit investment choice, as they are looking to diversify from overseas real estate in which they had invested heavily over the past few years.  

In particular, PMAA, a $3 billion retirement fund, recently moved up its risk spectrum to an opportunistic strategy to boost returns.

Brookfield has drawn around 700 billion won from Korean investors for its second infrastructure credit fund, which is expected to deliver over 7% of returns per annum.

LaSalle Investment Management’s latest European debt fund raised over 80 million euros ($94 million) from Korean limited partners in its first close at 435 million euros last month.

Write to Chang Jae Yoo at yoocool@hankyung.com
Yeonhee Kim edited this article.